Will the real buy-sell please stand up? Divorce courts don’t always accept these agreements
Abstract: Oversimplified or outdated buy-sell agreements sometimes come back to haunt divorcing shareholders. For divorce purposes, one cannot simply expect to value a private business interest using a valuation formula (or fixed price) set forth in the company’s buy-sell agreement. This article explains why it’s necessary to reconcile buyout formulas against values obtained using the cost, market and income approaches. A sidebar discusses factors that may influence whether a long-standing buy-sell agreement is still relevant.