DRAFT CROSS OPTION AGREEMENT FOR SALE / PURCHASE OF This Draft Form is provided as a Draft for consideration by prospective policyholders and their pressional advisers. Partnership Life Assurance Company Limited (Partnership) cannot advise policyholders or trustees and can accept no responsibility for the tax or other consequences using this Draft. The guidance notes regarding potential completion are to provide assistance should, after due consideration by the prospective policyholder s pressional advisers, it be decided to adopt this Draft. Further information on the tax and other legal implications using this type agreement is provided in the Guide to Business Protection from Partnership, provided separately, which prospective policyholders and their advisers should study as part the consideration all relevant factors before deciding whether to adopt all or part this Draft as part a business succession solution. Pressional advice must be sought in all cases. The Draft is provided on the clear understanding that it will not be executed without pressional advice being taken. The Draft provides alternative business descriptions depending on the structure the business. The appropriate description will need to be adopted should the Draft be approved for use by the pressional advisers. All the business owners taking part in the business succession arrangements should include their names and addresses. AGREEMENT This Agreement is made the day in the year between and and and and Hereinafter collectively called the Parties and individually called the Party CELEBRATING seeing retirement differently YEARS sin ce 1 9 9 5
The name the business should be included here. WHEREAS i. The Parties are [partners in the partnership/members the Limited Liability Partnership/shareholders in the Company] known as [( the Partnership )] [ the LLP ]/( the Company )]. The agreement only deals with purchase on death an owner. ii. The Parties desire to make provision for the sale and purchase any Party s [share the Partnership/interest in the LLP/shares in the Company] in the event his death by creating options for the sale and purchase such [share/interest/shares]. iii. For the purpose this Agreement the Partnership, the LLP or the Company shall include any successor partnership, LLP or limited company to which the entire business the Partnership, LLP or the Company has been transferred. NOW IT IS HEREBY AGREED AS FOLLOWS The option to sell must normally be exercised within 6 months from the date death. The option to buy must normally be exercised within 3 months the date death. SECTION 1: OPTION TO SELL In the event the death any Party the deceased s personal representatives shall have the option to sell the deceased s [share in the said Partnership/interest in the said LLP/shareholding in the said Company] to the surviving Parties such option to be exercised by notice in writing served within six months from the date death or within one month after a grant representation in respect the estate the deceased has been obtained if later or such later time as the Parties shall, by mutual agreement, determine and on the exercise such option the surviving Parties shall purchase the [share/interest/shares] from the deceased s personal representatives. SECTION 2: OPTION TO BUY In consideration the grant the option in Clause (1) above on the death any Party the surviving Parties shall have the option to purchase the deceased s [share in the said Partnership/interest in the said LLP/shareholding in the said Company] from the deceased s personal representatives such option to be exercised in writing served upon the deceased s personal representatives within three months from the date death or within one month after a grant representation in respect the estate the deceased has been obtained if later or such later time as the Parties shall, by mutual agreement, determine and on the exercise such option the deceased s personal representatives shall sell the [share/interest/shares] to the surviving Parties. 02 DRAFT CROSS OPTION AGREEMENT
The parties will make the purchase in the same proportions as they own the business. Independent valuation will be needed to determine the price. The agreement assumes that the share purchase will be funded by life policies in trust for the purchasing parties. SECTION 3: RELEVANT PROPORTIONS i. When an option in Clause 1 or 2 is exercised, the entire [share/interest/shareholding] the deceased Party shall be purchased by the remaining Parties. ii. Where there is more than one remaining Party purchasing the [share/interest/shares] then unless the Parties amongst themselves agree otherwise, each Party shall pay such proportion the value agreed as corresponds to the percentage the Partnership s or LLP s capital or the percentage the issued ordinary shares the Company to which that Party was beneficially entitled immediately before the event giving rise to the option in Clause 1 or 2 Provided Always that for the purposes determining such a percentage it shall be assumed that the Partnership s or LLP s capital or issued ordinary shares the Company did not include the share, interest or shares to which the deceased Party was entitled. SECTION 4: PRICE TO BE PAID The value the [share/interest/shares] to be sold and the [share/interest/shares] to be purchased shall be the fair market value the [share/interest/shares] as determined by an independent auditor or pressional valuer appointed by agreement between the Parties including personal representatives any deceased Party or legally empowered representative any incapacitated Party as appropriate. Provided that if the Parties fail to appoint such an auditor or valuer within one month the event giving rise to an option under Clause 1 or 2 this Agreement then any Party may request the President for the time being the Institute Chartered Accountants in England and Wales to appoint an independent valuer for that purpose. SECTION 5: INSURANCE POLICIES AND TRUSTS i. Each Party shall effect and maintain with a life assurance company agreed between the Parties a life assurance policy ( the Policy ) providing for the payment such sum on that Party s death as shall be mutually agreed between the Parties provided that such a Policy shall be issued to the proposer there upon trust for the primary benefit the business owners participating in the arrangement for share purchase other than the proposer. ii. Until the expiry such a Policy or the making a valid claim thereunder each Party shall pay all premiums and other monies payable for keeping up the Policy or such proportion the total premiums payable in respect all the Policies effected by the Parties as the Parties between them agree. iii. In the event any default on the part a Party in the performance any obligations in relation to the Policy, the other Parties may do whatever is necessary to make good such default and may recover from the Party in question all monies expended by them under this provision or may pay such monies out the [Partnership/LLP/Company] monies and so that any monies so paid out the [Partnership/LLP/Company] monies shall be charged in the [books the Partnership/LLP s accounts/company s accounts] against the Party in question. DRAFT CROSS OPTION AGREEMENT 03
This deals with how any mismatch between the life cover and the purchase price should be dealt with. SECTION 6: SUM ASSURED LESS/GREATER THAN AGREED VALUE If on the death any Party the option under Clause 1 or 2 above is exercised and for any reason the sum assured payable under the Policy is: i. less than the fair market value that Party s [share/interest/shares] the balance the said value shall be paid in [state number and frequency] equal instalments and the outstanding amount from time to time shall bear interest at [not bear interest]* ii. more than the fair market value that Party s [share/interest/shares] the other Parties shall [retain the said excess without any obligation to the Party s personal representatives or family there] [pay over the said excess to the personal representatives the deceased Party as though the said fair market value was equal to the sum assured]*. *[delete as appropriate] The constituent document(s) the business must be checked to ensure that it does not conflict with this agreement. SECTION 7: EFFECT OF AGREEMENT 7.1. This Agreement shall i. bind the Parties and their personal representatives ii. cease to apply to any Party when he shall cease to be a beneficial holder any capital in the [Partnership/LLP/Company] iii. cease to have effect on the [dissolution the Partnership/LLP/winding up the Company] iv. take effect only in compliance with and subject to the terms the [Partnership Agreement/Members Agreement/Memorandum and Articles Association the Company] which shall take precedence over the terms here should there be any conflict between the two. 7.2. Nothing in this Agreement shall i. in any way whatsoever prevent or hinder any Party from disposing charging encumbering dealing in any way with his [share/interest/shares] during his lifetime. 04 DRAFT CROSS OPTION AGREEMENT
SECTION 8: SIGNATURES IN WITNESS where the parties have set their hands the day and year first shown above Signed by the said (print name in block capitals) Signature In the presence Signature Witness Name Witness Signed by the said (print name in block capitals) Signature In the presence Signature Witness Name Witness DRAFT CROSS OPTION AGREEMENT 05
SECTION 8: SIGNATURES CONTINUED IN WITNESS where the parties have set their hands the day and year first shown above Signed by the said (print name in block capitals) Signature In the presence Signature Witness Name Witness Signed by the said (print name in block capitals) Signature In the presence Signature Witness Name Witness 06 DRAFT CROSS OPTION AGREEMENT
DRAFT CROSS OPTION AGREEMENT 07
Regent House, 1-3 Queensway, Redhill, Surrey RH1 1QT 0845 108 7240* info@partnership.co.uk www.partnership.co.uk *Telephone calls may be recorded for training and monitoring purposes. Local call rates apply. If you require this document in an alternative format please contact us. Partnership is a trading style the Partnership group Companies, which includes; Partnership Life Assurance Company Limited (registered in England and Wales No. 05465261), and Partnership Home Loans Limited (registered in England and Wales No. 05108846). Partnership Life Assurance Company Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Partnership Home Loans Limited is authorised and regulated by the Financial Conduct Authority. The registered fice for both companies is 5th Floor, 110 Bishopsgate, London EC2N 4AY. PRO2212 07.15