2. If there were important negotiations before the agreement was reached (unlike a parent who dictates the terms of an agreement with his family, for example. B in Estate of True, Jr); Agreed value. Shareholders who adopt an agreed value approach undertake to establish an initial value per agreement and then update the value, preferably once a year. The use of agreed value may be appropriate for any type of company, provided that shareholders are a little mature or, at the very least, have competent professional advisors to assist them in the annual valuation. Sometimes I recommend that clients keep a qualified business controller to determine the initial valuation and provide advice on updating the value each year. I also detail, as part of the retail contract, the factors that shareholders can consider each year. Note: It is not necessary for the same agreement to apply to all owners of an entity. Hybrid agreements should be carefully developed to prevent the remaining shareholders from having to buy the shares of a downable shareholder, but that the group will effectively finalize the purchase. (This may be the case if both shareholders and the company are bound by a mandatory purchase obligation.) When a company fulfills a shareholder`s commitment, the shareholder may be considered a constructive dividend up to the amount of the transaction.
If the other shareholders exercise a right of pre-emption, the company being required to acquire the stock if the shareholders do not exercise the right, this problem can be avoided. The capital gain can be kept to a minimum in the event of a purchase in the event of death. The transfer of shares held by a shareholder to other shareholders under a cross-purchase agreement is considered the sale or exchange of an asset. If the sale is made by the estate of a deceased shareholder, the estate cannot recognize any capital gain, since the basis of the stock may be raised to the fair value of the action at the time of the deceased`s death, depending on the date on which the fraudster dies. The rule of evaluation of a buy-back contract is essential to avoid unpleasant surprises or conflicts. In general, the fairest and most effective method of setting the purchase price is to conduct periodic independent business valuations and base the price on fair value. Let us assume, for the purposes of the article, that the most recent valuation statement is the one attached to the agreement and that the death benefit under the two policies is R8 million and R2.4 million and R10.4 million R10.4 million R10.4 million respectively.