My shareholders’ agreement has a buy-sell clause. Is there any money behind it?

Often not. A buy-sell clause says when a shareholder’s shares must be bought and how the price is set. It rarely says where the money comes from. If nobody has checked, the clause can work on paper and fail on the day it is needed.

The clause is triggered by events nobody plans for: a death, a disability, a shareholder leaving, a falling-out. When it triggers, the remaining shareholders or the company have to pay, usually within a set time.

There are only a few places the money can come from. Insurance, if a policy exists and the amount still matches what the shares are worth. The company’s own cash, paid out over time, if the business can spare it. Or borrowing, if the lender will allow it. Each has a limit. Policies bought years ago are often sized for a smaller business. Bank agreements commonly restrict paying out shareholders. And a price formula written when the company was half its size may not describe it now.

The clause itself is a legal document, and any change to it is for your lawyer. The question here is simpler: if it triggered next month, could the business pay?

What you can look at this week: read the clause and write down three things: what triggers it, how the price is set, and how it is funded. If there is a policy, find its amount and the date it was last reviewed. Then check your credit agreement for any limit on paying out a shareholder.