A succession agreement is a legal document that outlines the specific steps that will be taken to ensure a smooth transition of power or ownership in the event of a death, disability, or other unforeseen event. This document can be particularly useful for business owners who want to make sure their company remains operational in the event of an unexpected turn of events.
Below is a list of common sections included in Succession Agreements. These sections are linked to the below sample agreement for you to explore.
This Succession Agreement (the “Agreement”) is made and entered into this day of , 200 , by and among (the “Corporation”) and ( the “Founding Doctor”).
A. The Corporation is a professional medical corporation a (“Professional Corporation”) organized under the applicable provisions of .
B. The Founding Doctor is currently the legal and beneficial owner of all of the issued and outstanding shares of the Corporation (the “Shares”).
C. The Founding Doctor is the sole member of the Board of Directors of the Corporation.
D. The Corporation has entered into that certain management agreement (the “Management Agreement”) dated between the Corporation and (“Management Company”). The Management Company currently provides management services to the Corporation pursuant to the Management Agreement. The Founding Doctor currently owns an equity interest in the Management Company or one of its affiliates. The Founding Doctor agrees that he shall not profit from the business of the Corporation by reason of his position as a director or shareholder of the Corporation, other than indirectly through the Management Company or its affiliates.
E. The parties hereto desire to promote their mutual interest by imposing certain restrictions on the sale, transfer or other disposition of the Shares and provide for certain disposition of the Shares in the event of the death, permanent disability, permanent incapacity or termination of any of the Doctors (as defined below), thus ensuring the continued successful operation of the business of the Corporation. Further, the parties hereto desire to set forth certain of their understandings with reference to other matters pertaining to the Corporation.
F. Each of the parties has agreed to be bound by the covenants and agreements set forth herein [and the spouse of the Founding Doctor has executed an Acknowledgment and Consent in substantially the form of Exhibit “A” for the mutual benefit of the parties hereto, collectively and individually].
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. GENERAL PURPOSE; CONSTRUCTION .
As used herein, the term “Succession Events” shall mean the death, permanent disability, permanent incapacity or loss of legal ability to be a shareholder or director of a professional corporation of the Founding Doctor or any direct or indirect successors, as a shareholder or director, to any of the Founding Doctor’s rights in or duties to the Corporation (each a “Doctor” and collectively, the “Doctors”) or the termination (for any reason whatsoever) of any of the Doctors as an employee, consultant, stockholder or member of the Board of Directors of the Management Company. The purpose of this Agreement is to provide for the orderly management of the Corporation. In the event of a Succession Event, it is the further purpose of this Agreement to provide for orderly transition in the ownership of the stock of the Corporation and the orderly transition in the members of the Boards of Directors of the Corporation. In connection therewith, it is the intent of the parties hereto that, notwithstanding the occurrence of a Succession Event’
(1) The Corporation shall maintain its existence as a Professional Corporation or other entity with the right to practice medicine.
(2) The Corporation shall continue to honor the Management Agreement.
(3) The Boards of Directors of the Corporation shall consist of employees or directors of, or independent contractors to, the Management Company or one of its affiliates who are otherwise qualified to serve thereon.
2. EVENTS PRIOR TO SUCCESSION EVENTS .
(a) During the term of the Management Agreement, each member of the Board of Directors of the Corporation shall be an employee or director of, or independent contractor to, the Management Company (or an affiliate thereof) who is otherwise qualified hereunder. Additionally, no person shall be a shareholder of this Corporation unless such person also is a director of this Corporation at the same time. In addition, each member of the Board of Directors must be a person who is licensed to render professional medical services. A licensed person who is not legally disqualified to render the professional services that the Corporation is or was rendering is hereinafter referred to as a “Qualified Medical Professional.”
(b) The Doctors agree to vote the Shares only for directors of the Corporation who are Qualified Medical Professionals and who are otherwise qualified as set forth in the preceding paragraph.
(c) During the term of this Agreement,. the Doctors shall not sell, transfer, pledge or otherwise hypothecate the Shares. The Shares will be marked with a restrictive legend with respect thereto.
(d) The Doctors agree to, and shall cause all directors of the Corporation to, take all steps necessary to ensure that the Corporation remain in good standing as a professional corporation or other entity.
(e) The Doctors will consult with the Management Company prior to taking any action for the Corporation and, unless compliance with the advice of the Management Company is contrary to the fiduciary duties of the Doctors to this Corporation or otherwise prohibited by law, the Doctors shall act in accordance with such advice, including but not limited to issuance of debt, negotiation and acceptance of contracts and establishment and approval of operating and capital budgets.