Question

15 while they have similar outcomes, cross - purchase buy - sell agreements and share redemption buy - sell agreements also have some differences. xyz company is incorporated as a corporation. there are four shareholders and each of them owns 25% of the shares (50 shares each). the shareholders are considering both types of buy - sell agreements.
if one shareholder dies, which of the following elements represents a difference in outcomes between the two types of buy - sell agreements?
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a. the corporation becoming a general partnership.
b. amount the deceased shareholder’s estate will receive
c. surviving shareholders’ interest in the company
d. number of shares outstanding
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Explanation:

To solve this, we analyze cross - purchase and redemption buy - sell agreements:

1. In a cross - purchase buy - sell agreement, surviving shareholders buy the deceased's shares. In a redemption agreement, the corporation buys the deceased's shares.
2. Option a: Both types can involve the corporation or shareholders buying, so this is not a difference.
3. Option b: The amount the estate receives can be structured similarly in both, so not a difference.
4. Option c: In cross - purchase, surviving shareholders get the interest (shares) of the deceased. In redemption, the corporation gets it. So this represents a difference.
5. Option d: The number of shares outstanding can be managed similarly in both, so not a difference.

Answer:

c. Surviving shareholders' interest in the company