An agreement directing life insurance proceeds to fund the Buy Sell Agreement. Contains provisions for:

• Requirement to take out life insurance
• Payment of policy proceeds
• Payment amount
• Payment of premiums
• Termination

Life insurance proceeds are used to purchase the share of an existing business owner.

Buy Sell Funding Agreement (Australia)

About This Agreement

This Buy Sell Funding Agreement works alongside a Buy Sell Agreement to ensure that life insurance or total permanent disability insurance is used to fund the purchase of a departing proprietor’s share in the business.

It sets out how insurance policies are maintained, how proceeds are paid, and how those proceeds reduce the purchase price otherwise payable under the Buy Sell Agreement.

Key Features

• Definitions of key terms including “Market Value”, “Buy Sell Agreement”, “Policy”, and “Policy Register”

• Requirement for life insurance and TPD insurance policies to match business value

• Policy register to be maintained and updated by all parties

• Procedures for obtaining additional cover if business value increases

• Restrictions on transferring, cancelling, or dealing with policies without approval

• Payment of policy proceeds on the exercise of buy sell options

• Reduction of purchase price by the amount of policy proceeds received

• Allocation of any shortfall or excess against purchase monies

• Provisions for default on premium payments and recovery of amounts paid

• Termination provisions if the Buy Sell Agreement or underlying business agreement ends

• General clauses covering costs, notices, counterparts, interpretation, and jurisdiction