Shareholder agreements are usually drafted carefully and then filed. Years later the business is worth more, the shareholders are older, and the funding assumption has never been tested.
Three questions worth asking today
First: if a shareholder died tomorrow, exactly where would the purchase price come from? Cash, financing, insurance or an instalment obligation each have different consequences for the surviving business.
Second: does the valuation method in the agreement still reflect the business? A formula set years ago often does not.
Third: is disability covered? It is a common triggering event and the least frequently funded one.
Reviewing it
Reviewing the agreement alongside your lawyer, accountant and insurance advisor at the same time takes an hour or two and usually surfaces at least one gap.