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The Cross Purchase Buy Sell Agreement Funded With Life Insurance is a crucial business succession planning tool used by Canadian closely-held businesses and professional practices to ensure smooth ownership transition upon a shareholder's death. This agreement becomes necessary when multiple shareholders wish to ensure that surviving shareholders can purchase a deceased shareholder's interest while providing liquidity to the deceased's estate. The agreement requires each shareholder to maintain life insurance policies on other shareholders, with the death benefit serving as funding for the purchase obligation. It typically includes provisions for valuation methodology, transfer procedures, and insurance policy requirements, all structured to comply with Canadian federal and provincial laws, including relevant tax regulations and insurance legislation. This type of agreement is particularly important for businesses where ownership continuity and control are vital to ongoing operations and success.
