Buy-and-sell agreements. Protecting your business interests.

Francois le Clus • July 1, 2024

Buy-and-sell agreements. Protecting your business interests. 


If you’re running a business with partners, having a buy-and-sell agreement in place is crucial.


But why, you may ask? The answer is pretty straightforward.


Here’s the deal: When you pass away, your shares in the company become part of your estate or transfer to your business partner as per your shareholder’s agreement. If there’s no clear plan in place, those shares end up in your estate, to be distributed according to your will.


Enter the buy-and-sell agreement – your solution to these issues. This agreement is backed by life insurance policies on each partner’s life, ensuring enough cash to cover the purchase price. Simultaneously, the agreement establishes the obligation to sell the deceased partner’s shares and the obligation for the surviving partner to buy them.


Now, let’s talk about the risks:


  • Insufficient cash: The remaining owners might not have enough cash to buy the deceased partner’s business interests.
  • Uncertain fair price: Heirs might not be guaranteed a fair price for the business interests, potentially leading to a forced sale.
  • Ownership complications: The remaining owners might face unclear ownership, dealing with heirs or delays in estate settlement.
  • Business capital drain: Funding the purchase could drain the business’s capital, jeopardizing its continuity.


On the flip side, the benefits are significant:


  • Business continuity: The business keeps going without outside interference.
  • Smooth transition: Funds are available for a timely conclusion of the transaction.


For dependents or beneficiaries, the advantages are:


  • Inherited capital: They receive a capital amount instead of dealing with a business they may not know.
  • Financial security: The received capital can replace lost income and contribute to overall estate planning.


Now, let’s consider the importance of a shareholder’s agreement:


This agreement, entered into during the partners’ lifetimes, governs their relationship and outlines what happens to shares in the event of death or retirement. Without it, shares become part of the deceased partner’s estate.


And remember, getting the structure right is essential to qualifying for estate duty exemption. The Estate Duty Act provides exemptions if specific conditions are met.


In conclusion, a buy-and-sell agreement is vital for protecting interests and ensuring the intended transaction occurs. Without it, disputes can end in costly and time-consuming court battles, benefiting no one, especially not the deceased owner’s beneficiaries.

Chart of the month: 5 Largest stocks dominate

By Geo Botha • October 3, 2025
In this month’s chart we can see that over the last 60 years, top five stocks now make up nearly 35% of the US market — the highest concentration on record. They include: Nvidia, Microsoft, Apple , Alphabet (Google) and Amazon. Market leadership is becoming increasingly narrow, leaving investors more exposed if these giants stumble. At Bovest we take this into consideration when constructing our client’s portfolios and it serves as a reminder of the risks of concentration and the value of diversification. Although almost every investor will have exposure to these large tech companies in one way or another, it is important to limit the level of exposure and not get caught into investing in themes or falling in love with a certain stock. At a recent event, hosted by pour partners at Ninety-One asset managers, many of the talks still revolved around the impact of AI, not only in the workplace, but investment opportunities as well. This boasts the idea that these stock might still have room to grow, but at a certain point valuations move across the tipping point, and we will see a correction in prices. Kindly contact our team if you have any questions.

Protecting the Inheritance of Minor Children

By Ruvan J Grobler • October 3, 2025
In many instances, spouses choose to bequeath their whole estate to each other and the surviving spouse will look after the children. This is also good estate planning. But what will happen to the children and assets should both parents pass away? Underage children can inherit these assets but should be managed through a testamentary trust. A short video summary of the below can be watched here: https://www.instagram.com/reel/DPOqkx3DP1S/?utm_source=ig_web_copy_link&igsh=MzRlODBiNWFlZA== What Is a Testamentary Trust? A testamentary trust is a legal entity created in terms of a person’s Will, which only comes into effect upon their death. Unlike inter vivos trusts, it is not operational during the testator’s lifetime. The Will serves as the trust instrument, and the testator is the founder. How Is It Created? Drafting the Will: The Will must clearly state the intention to create a trust, name the beneficiaries, identify the assets to be placed in trust, and outline the terms and conditions. Activation: Upon death, the nominated trustees apply to the Master of the High Court for Letters of Authority to manage the trust. Trustees: It’s advisable to appoint at least one independent trustee with fiduciary expertise to ensure proper governance. Why Should Clients Consider It? Protection for Minor Children: Minors cannot legally inherit until age 18. A testamentary trust ensures their inheritance is managed responsibly until they reach maturity. Special Needs Planning: A Type A Special Trust offers tax-efficient support for beneficiaries with disabilities. Asset Preservation: Prevents reckless spending by beneficiaries. Trustees manage and distribute assets according to the testator’s wishes. Managing Indivisible Assets: Useful for assets like farms or holiday homes that cannot be easily split among heirs. Tax Efficiency: Testamentary trusts may offer tax advantages, especially in the case of special trusts. Important Considerations Validity of the Will: If the Will is invalid, the trust cannot be established. Professional drafting is essential. Trustee Selection: Trustees must be trustworthy, capable, and ideally include an independent party to avoid conflicts. Costs & Complexity: Testamentary trusts involve legal and administrative costs. Clients should be made aware of ongoing compliance and management responsibilities. Family Dynamics: Clear communication and transparency in the Will can help prevent disputes among beneficiaries. Contact me at ruvan@bovest.co.za for more information. Ruvan J Grobler RFP™ (PGDip Financial Planning)