Canada Shareholder Buy-Sell Agreement (Promissory Note Method)
Plan ahead for the continuation of your business upon the death or retirement of an owner with this Shareholder Buy-Sell Agreement (Promissory Note Method) for Canadian companies.
- The corporation will hold life insurance policies on each of the shareholders and use the proceeds to redeem and acquire its own shares from a deceased shareholder's estate.
- If a shareholder dies, the surviving shareholders can purchase the deceased's shares on a pro rata basis (proportionate to their current shareholdings) by issuing the corporation a promissory note for the purchase price.
- The corporation will loan the purchaser the amount of the purchase price from the insurance proceeds, and then makes an election for a deemed dividend to be paid from the capital dividend account if possible.
If you own a small or family business in Canada, the Shareholder Buy-Sell Agreement (Promissory Note Method) is a succession planning method you can consider.
Last Updated: 14-April-2016