By J. Marc Ward and Grace Bogart | Fredrikson & Byron, P.A.
Shareholder agreements are an important piece of any bank’s succession plan. Without them they run the risk of in-fighting, loss of control, and lawsuits. Lack of succession planning too often has resulted in squabbles among family members over the ownership, control, and future of the family bank. Mothers have sued sons, sisters have sued brothers, and brothers have sued each other. The foregoing are all true cases involving family businesses that neglected to have shareholder agreements.
How does a shareholder agreement, also commonly referred to as a buy-sell agreement, work? The shareholders of a bank holding company (“BHC”) sign an agreement that restricts how the shares of the holding company can be sold or otherwise transferred. The agreement explains what happens to the stock in the event of death, disability, bankruptcy, and divorce of the shareholders. If employees own stock, the agreement should require the sale of their stock back to the company upon termination of employment.
How does a shareholder agreement, also commonly referred to as a buy-sell agreement, work? The shareholders of a bank holding company (“BHC”) sign an agreement that restricts how the shares of the holding company can be sold or otherwise transferred. The agreement explains what happens to the stock in the event of death, disability, bankruptcy, and divorce of the shareholders. If employees own stock, the agreement should require the sale of their stock back to the company upon termination of employment.
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