PART 2 OF 4: The Triggering Events

The departures a buy-sell agreement must anticipate.

A buy-sell agreement is built around triggering events, the circumstances that cause an owner's interest to be bought or sold. Each type of departure will raise different concerns and calls for different terms. This part examines the events a buy-sell should address and how they differ.

Retirement and voluntary departure

The most common and most predictable trigger is an owner choosing to leave or retire. The agreement should define how much notice is required, how the interest is valued, and how the buyout is paid, giving both the departing owner and the practice a clear and orderly path.

Death of an owner

When an owner dies, the agreement should ensure the interest is bought by the practice or the remaining owners rather than passing to heirs who cannot or should not co-own a professional practice. This protects both the deceased owner's family, who receive value for the interest, and the remaining owners, who retain control. Funding this buyout is often where life insurance plays a role.

Disability

A disabling event that prevents an owner from practicing raises hard questions the agreement should answer in advance:

• How disability is defined and determined.
• Whether and when the disabled owner's interest is bought out.
• How the buyout is valued and funded during a difficult time.

Removal for cause

Some departures are involuntary, such as the loss of a license, serious misconduct, or other events that make continued ownership untenable. The agreement should define the grounds for removal and the terms on which a removed owner's interest is bought, often on terms less favorable than a voluntary exit.

Why each trigger needs its own terms

Treating every departure the same is a common drafting mistake. A voluntary retirement and a removal for cause should not carry identical terms, and a death should not be handled like a planned exit. Tailoring the terms to each trigger is what makes a buy-sell fair and workable across all range of events it must cover.

How West Coast Health Law Can Help

We help practices define the triggering events in a buy-sell agreement and tailor the terms to each, so every kind of departure is handled fairly and clearly.

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every transaction is different; consult a qualified attorney about your specific situation.