A purchase and sale contract is for example when there is a partnership and the partners enter into an agreement stipulating that after the death of one of the partners, the remaining partners can buy back the deceased partner`s share. This type of agreement can also be entered into between directors of companies or members of Close Corporations. This purchase and sale agreement is normally guaranteed by a buy and sell policy, which means that the proceeds of the policy will be used to purchase the deceased partner/director/member`s stake in the business. The policy must have been entered into for the purpose of redeeming the deceased person`s interest or part of the interest, failing which the policy will not be released from the owner and included in the deceased person`s estate. As already stated, all policies relating to the life of the deceased person, whether or not that deceased person owned or benefited from the policy, apply. However, if politics was a key policy; a purchase and sale policy or a policy that was entered into and given under a conjugal contract (before marriage) or marriage (after marriage), such a policy is not considered the property of the deceased. The weakest option is life insurance in which the buyer insures the seller for the full purchase price of the business. This can be done with an existing directive or a new directive. However, the new policy is preferable because of the advantageous inheritance tax and the advantages of capital gains tax. (An existing policy is usually only used if the seller is not insurable due to illness or age.) It is important that sellers and buyers agree in advance and document the basis for assessing the business interest, otherwise no contract will be concluded, it is also important to avoid possible disputes in the future. This valuation method is used to determine the purchase price at the beginning of the contract. In next week`s issue, we will look at some practical examples of the physical implementation of these agreements and guidelines.
Potential buyers can be current partners/co-owners, employees or even competitors. It is therefore possible for an individual entrepreneur or an individual entrepreneur to sign a purchase and sale contract. – This agreement should be formally documented in order to avoid problems at the time of sale. The deceased must not have paid any of the premiums of the policy. When a deceased has paid premiums for a purchase and sale policy, it is considered the property of the deceased and is not entitled to an exemption, although SARS sometimes allows exemption from the policy. In a typical “Buy & Sell” contract, different business owners withdraw insurance on the life of the other. For example, if three persons are business partners and wish to take out buy-back and sale insurance, the policies should be structured as follows: the first observation to be made in this context is that the purchase and sale contract is not a provision of the articles of association, the foundation declaration, the association contract or the rules of the company. where applicable, or where the value of the shares of the deceased or of another member is determined in accordance with the provisions of points (f), (ii)(ii) or (ii)(ii) of Section 5(1). If this is the case, no provision of the contract of association or the rules of the company must be taken into account, according to which the value of the shares of the deceased or of another member must be determined.
It is important to note that sales and sales contracts should be subject to regular review to ensure that the contract continues to reflect the intentions of the parties and that the amounts promised correspond to the value of the business. Please speak to a qualified financial advisor to ensure that this important part of your financial programming is taken into account. . . .