New York Buy-Sell Agreement Template
The New York rules that shape the document: the BCL Section 1118 fair-value buyout election, common-law non-compete reasonableness, and equitable-distribution marital property (no community-property consent).
Introduction
A buy-sell agreement is a contract among the owners of a New York business that determines in advance who may buy an owner's interest, the price or valuation method, and the triggers such as death, disability, divorce, or departure. In New York, the rule that most shapes the document is Business Corporation Law Section 1118: when a shareholder files a minority-oppression dissolution petition under BCL Section 1104-a, any other shareholder or the corporation may elect, within 90 days of the filing, to purchase the petitioner's shares at fair value. A New York buy-sell's valuation clause should anticipate that election so the parties, not a court, control the price. New York is also an equitable-distribution state under Domestic Relations Law Section 236B, so unlike community-property states it imposes no spousal-consent precondition on transferring a business interest, and any non-compete on a departing New York owner is judged by common-law reasonableness rather than a statute.
Key Things to Know
- 1
A New York buy-sell agreement is a binding contract among the co-owners of a business that fixes who can buy a departing owner's interest, the price or valuation method, and the triggering events, so a death, divorce, or exit does not force the business into a dispute or a sale to an outsider.
- 2
In New York, Business Corporation Law Section 1118 lets any other shareholder or the corporation elect, within 90 days after a minority-oppression dissolution petition is filed under BCL Section 1104-a, to purchase the petitioner's shares at fair value. Your valuation clause should set the method the owners prefer so this election runs on agreed terms.
- 3
New York's BCL Section 1118 buyout is keyed to fair value as of the day before the petition, so a New York buy-sell that defines price, timing, and payment terms gives the parties leverage to control what a court would otherwise determine in a Section 1104-a proceeding.
- 4
New York is an equitable-distribution state under Domestic Relations Law Section 236B, not a community-property state. There is no statutory requirement that a spouse consent to or join the transfer of a business interest titled in the other spouse's name, so a New York buy-sell needs no community-property spousal-consent clause.
- 5
A non-compete on a departing New York owner has no governing statute. New York courts enforce a sale-of-business covenant only if it is reasonable in time, geography, and scope and protects a legitimate interest such as goodwill, so draft any restriction narrowly.
- 6
In New York, no notarization, witnesses, or government filing is required for a private buy-sell contract. A signed writing suffices, and New York's statute of frauds (General Obligations Law Section 5-701) requires a writing for certain agreements. Keep the signed agreement with the company records.
- 7
Fund the New York buyout before you need it. Owners commonly use life or disability insurance, a sinking fund, or installment payments so the agreed valuation can be paid, rather than leaving the price to a fair-value determination under New York's BCL Section 1118 election. Match the funding to your valuation.
Key decisions before you file
Before you file a Buy-Sell Agreement in New York, a few decisions shape the document: which option to choose and what each one means. The Buy-Sell Agreement guide walks through them.
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New York Requirements for Buy-Sell Agreement
New York Business Corporation Law Section 1118 lets any other shareholder or the corporation elect, within 90 days after a minority-oppression dissolution petition is filed under BCL Section 1104-a, to purchase the petitioner's shares at fair value. Draft the New York valuation clause to set the price and terms the owners prefer for that election.
Because New York's BCL Section 1118 buyout runs at fair value, a New York buy-sell should define price, timing, and payment terms so the parties, not a court, control the amount paid in a Section 1104-a proceeding. Update the valuation periodically so the agreed method stays credible.
New York has no non-compete statute. A covenant against a departing owner is enforceable only if a New York court finds it reasonable in duration, geography, and scope and tied to a legitimate interest such as goodwill sold with the interest. Draft any New York restriction narrowly to survive review.
New York is an equitable-distribution state under Domestic Relations Law Section 236B, not a community-property state. There is no statutory requirement that a spouse consent to or join a transfer of a business interest, so a New York buy-sell needs no community-property spousal-consent clause; marital claims are resolved at divorce.
A New York buy-sell agreement is valid as a signed writing, and New York's statute of frauds under General Obligations Law Section 5-701 requires a writing for certain agreements. No notarization, witnesses, or government filing is required. Keep the signed agreement with the company records and update the valuation periodically.
Frequently Asked Questions
It is a contract among the owners of a New York business that sets who may buy an owner's interest, the price or valuation method, and the triggers such as death, disability, divorce, or a voluntary exit. It keeps ownership inside the group and prevents disputes when an owner leaves.
In New York, an operating agreement or bylaws set how the business runs day to day. A buy-sell agreement covers only ownership transitions: what happens to an owner's share on death, disability, divorce, or departure, how it is priced, and who may buy it. Many New York companies keep both.
Under New York Business Corporation Law Section 1118, when a shareholder files a minority-oppression dissolution petition under BCL Section 1104-a, any other shareholder or the corporation may elect within 90 days to buy the petitioner's shares at fair value. A clear buy-sell valuation clause helps set that price.
Usually no. New York is an equitable-distribution state under Domestic Relations Law Section 236B, not a community-property state, so there is no statutory requirement that a spouse consent to transferring a business interest. Marital-property claims are handled at divorce, not as a precondition to transfer.
New York has no non-compete statute. A sale-of-business covenant is enforceable only if a New York court finds it reasonable in duration, geography, and scope and tied to a legitimate interest such as goodwill. Draft any restriction narrowly, because an overbroad covenant may be reduced or refused.
New York's BCL Section 1118 election lets other shareholders buy a petitioner's shares at fair value, which a court can determine. Setting a clear valuation method, timing, and payment terms in your New York buy-sell gives the parties a basis to control that price rather than leaving it to litigation.
No. New York requires no notarization, witness, or filing for a private buy-sell contract. A signed writing suffices, and New York's statute of frauds under General Obligations Law Section 5-701 calls for a writing for certain agreements. Keep the signed agreement with the company records and update the valuation.