Buy-Sell Agreements

Saphier and Heller's work for physicians and medical groups in California frequently includes advice regarding buy-sell agreements and the drafting of such agreements.  In the case of professional corporations, these typically take the form of shareholders agreements, and in the case of partnerships, buy-sell provisions typically are incorporated into the partnership agreement.

The issue that requires the most focus in these agreements, in our experience, is the valuation of a shareholder’s or partner’s interest upon departure from the group. Different methods of valuation may be used, depending on the group’s preferences.  In some cases, a formula may work, and in others, an appraisal may be necessary. Other possibilities may be considered, as well.  Special considerations arise in two-person groups and in groups that include more than one kind of licensee.

Important related issues arise with respect to covenants not to compete and the inclusion of accounts receivable and goodwill in the valuation.  Covenants not to compete often are unenforceable and therefore need to be structured and drafted carefully.

We work closely with our clients to make sure that their buy-sell agreements fit their particular circumstances.

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