To prevent an uncomfortable and embarrassing separation, the owners should agree on how to separate before joining together. Very similar to a prenuptial in marriage, a ‘Cross Purchase Agreement’ identifies the various business issues to address such as valuation of the ownership position, the respective form of purchasing the departing ownership and time period of payout.
Cross Purchase Agreement
A legal document reflecting the agreement between business owners of the same company as to how to address the value and terms associated with a departing owner. This documents binds the owners to the terms of a relationship between each other.