What does a buy and sell agreement have to say about the coverage?
It has to say who owns the coverage, who pays for it, what the shares are worth and how that figure is arrived at, what the money must be used for when it arrives, what happens if there is too much of it or too little, and what happens when a shareholder leaves for a reason other than death. Most agreements state two of the six.
What kind of answer this is
- Claim type: Requires another professional
- Claim type: Professional judgment
- Jurisdiction: Canada wide
A buy and sell agreement is a contract between the shareholders, drafted by counsel. Nothing here is a drafting instruction, and coverage arranged before the agreement is written is coverage arranged in the dark.
How it works
The agreement creates the obligation and the coverage funds it. That order matters, because money arriving with no obligation attached is simply money in somebody's hands, and the people who expected it to buy shares have no document compelling anyone to sell.
The cost or the catch
Agreements go stale quietly. Shareholders change, values change and the coverage stays the size it was, so the commonest failure is not an absent agreement but a current one describing a company that no longer exists.
Where this answer may not apply
- Where no agreement exists, the coverage funds nothing in particular and the estate and the survivors negotiate from scratch.
- An agreement written before the current shareholders arrived may name people who have gone.
- A valuation formula fixed a decade ago can be badly wrong today, and the coverage is sized against that formula.
- Quebec drafting practice and common law drafting practice differ, and an agreement written for one province is not automatically fit for another.
What to verify in your own contract
- The date the agreement was last amended, and whether the shareholder list still matches.
- The valuation clause, read out loud, and whether anyone can apply it without help.
- Whether the agreement names the coverage, or merely assumes it exists.
- Who is obliged to keep the coverage in force, and what happens if they stop.
- Whether counsel and the CPA have both read the current version this year.
Continue to the full explanation
Prepare the questions for a CPA, a lawyer and an insurance professional.
Sources
- Canada Business Corporations Act, Justice Laws Canada, verified 2026-08-30
- Civil Code of Quebec, LegisQuebec, verified 2026-08-30
Accountability and disclosure
- Written by
- José Salloum
- Professional capacity
- Financial security advisor, Canadian Wealth Creation Centre Inc., operating as IBC Financial
- Reviewed by
- Tax and corporate tier, reviewed by a qualified Canadian tax professional before publication
- Jurisdiction
- Canada wide
- Last reviewed
- 2026-08-30
- Version
- 1.0
- Compensation disclosure
- Canadian Wealth Creation Centre Inc., operating as IBC Financial, may receive insurer paid compensation if a policy is purchased. It takes the form of first year compensation followed by renewal compensation, and the amount varies by insurer, product, age, premium, contract design, riders and the arrangement with the managing general agency. No single figure would describe every contract honestly, and none is published here.
- Report a correction
- Info@ibcfinancial.com. Write without a policy number, medical information or account details.
Last reviewed 2026-08-30. By Jose Salloum, Financial Security Advisor.