North Dakota Buy-Sell Agreement Template
The North Dakota rules that shape the document: the sale-of-goodwill non-compete exception under N.D.C.C. 9-08-06 and the buyout in lieu of dissolution under N.D.C.C. 10-19.1-115.
Introduction
In North Dakota, a buy-sell agreement is a contract among business co-owners that establishes ahead of time who may buy a departing owner's interest, at what price, and on which triggering events such as death, disability, divorce, or exit. In North Dakota, two rules shape the document beyond the national template. First, North Dakota is one of the few states that voids non-competes by statute: N.D.C.C. 9-08-06 makes any contract restraining a lawful profession, trade, or business void, so a departing owner's non-compete survives only under the enumerated sale-of-goodwill exception, anchored to the sale of the owner's interest or goodwill within a reasonable geographic area and for a reasonable time. Second, North Dakota is an equitable-distribution state, not a community property state, so no spousal-consent clause is required. Your valuation clause should also anticipate N.D.C.C. 10-19.1-115, which lets a North Dakota court order a fair-value buyout of shares in lieu of dissolution.
Key Things to Know
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A North Dakota 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.
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North Dakota is one of a small group of states that voids non-competes by statute. N.D.C.C. 9-08-06 makes any contract that restrains a person from exercising a lawful profession, trade, or business void, except for the exceptions enumerated within the section. A generic covenant against a departing owner is unenforceable in North Dakota.
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A non-compete against a selling owner is enforceable in North Dakota only through the sale-of-goodwill exception in N.D.C.C. 9-08-06. A person who sells the goodwill of a business may agree with the buyer to refrain from a similar business within a reasonable geographic area and for a reasonable length of time, if the buyer carries on a like business there.
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N.D.C.C. 9-08-06 also lets partners, members, or shareholders agree not to compete upon or in anticipation of dissolution or dissociation, or as part of an agreement addressing the sale of an ownership interest, within a reasonable geographic area. This second exception is the natural home for a North Dakota buy-sell non-compete.
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North Dakota is an equitable-distribution state, not a community property state, so a North Dakota buy-sell agreement does not need a spousal-consent or community-property joinder clause. Focus the drafting instead on triggers, valuation, and the sale-of-goodwill non-compete.
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N.D.C.C. 10-19.1-115 lets a North Dakota court, on motion of the corporation or a shareholder, order the sale of shares to the corporation or other shareholders at fair value as of the commencement of the action, and to consider a buyout as lesser relief before dissolution. Any buy-sell agreement is presumed to reflect the owners' reasonable expectations.
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Fund the North Dakota 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 N.D.C.C. 10-19.1-115. Match the funding to your valuation.
Key decisions before you file
Before you file a Buy-Sell Agreement in North Dakota, 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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North Dakota Requirements for Buy-Sell Agreement
North Dakota Century Code Section 9-08-06 voids any contract that restrains a lawful profession, trade, or business, except for the exceptions enumerated in the section. A departing owner's non-compete is enforceable in North Dakota only if it fits the sale-of-goodwill or ownership-sale exception, anchored to the sale of the interest and limited to a reasonable geographic area and reasonable time.
Under North Dakota Century Code Section 9-08-06, a person who sells the goodwill of a business, and partners, members, or shareholders acting upon dissolution, dissociation, or the sale of an ownership interest, may agree not to carry on a similar business within a reasonable geographic area for a reasonable time. Draft the buy-sell non-compete to fit this exception.
North Dakota Century Code Section 10-19.1-115 lets a court, on motion of the corporation or a shareholder, order the sale of shares to the corporation or other owners at fair value as of the commencement of the action, and to consider a buyout as lesser relief before dissolution. A North Dakota buy-sell agreement is presumed to reflect the owners' reasonable expectations.
North Dakota is an equitable-distribution state, not a community property state, so a North Dakota buy-sell agreement does not need a spousal-consent or community-property joinder clause. The correct treatment is to omit that block and concentrate the drafting on triggers, valuation, and the sale-of-goodwill non-compete.
Under North Dakota's Uniform Commercial Code Article 8 (North Dakota Century Code chapter 41-08), a transfer restriction binds a later buyer only if it is noted conspicuously on the share certificate, or, for uncertificated shares, the registered owner has been notified. Add the legend when your North Dakota company issues or endorses certificates.
Frequently Asked Questions
It is a contract among the owners of a North Dakota 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.
An operating agreement or bylaws set how a North Dakota 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 North Dakota companies keep both.
Only under the sale-of-goodwill exception. North Dakota Century Code Section 9-08-06 voids non-competes generally but lets an owner who sells their interest or goodwill agree not to compete in a reasonable geographic area for a reasonable time. Tie the clause to the sale of the interest, or it is void.
Generally no. North Dakota is an equitable-distribution state, not a community property state, so a buy-sell agreement does not require a spousal-consent or community-property joinder clause. The owners sign, and the company countersigns. Focus the drafting on triggers, valuation, and the sale-of-goodwill non-compete instead.
North Dakota Century Code Section 10-19.1-115 lets a court, on motion of the corporation or a shareholder, order the sale of shares to the corporation or other owners at fair value as of the commencement of the action, and to weigh a buyout as lesser relief before dissolving the company. A clear valuation clause guides that outcome.
No. There is no notarization, witness, recording, or filing requirement in North Dakota. A buy-sell agreement is valid as a signed writing under North Dakota's statute of frauds (North Dakota Century Code chapter 9-06). Keep the signed agreement with the company records and update the valuation periodically.
North Dakota owners commonly use life or disability insurance on each owner, a sinking fund, or installment payments from the buyer. Pre-funding matters because a North Dakota buyout can otherwise be priced at fair value under Section 10-19.1-115. Match the funding to your valuation so the agreed price can be paid.