Drafting Valuation Provisions for Closely Held Businesses in Buy-Sell Agreements and Governance Documents

Description

Corporate counsel that represents a closely held entity, whether it is a corporation, LLC, or partnership in which there are a small number of owners and no public market for the stock or shares, it can be difficult to discern the business' value. Whether the owners are looking to sell a portion of the business or the entire enterprise, creating a framework for valuation early in the corporate legal development can alleviate future disputes.

There are numerous valuation methodologies and advantages and disadvantages to using each. Some methodologies favor particular industries and whether conflicts of interest exist or where a fiduciary duty is owed. Drafting these provisions can also forestall future disputes among owners.

Outside of governance documents, corporate counsel might consider drafting buy-sell agreements that include methodology and adjustment provisions. However, counsel must consider when and how to incorporate an entity's real estate, whether it should be part of a single-asset sub-entity, and how and when to address goodwill as part of business value.

Listen as our authoritative panel discusses best practices for drafting valuation provisions in corporate governance documents and buy-sell agreements. The panel will address the various valuation methodologies and how corporate documents should anticipate adjustments and fixed value of all assets, including real estate and goodwill.