How should a shareholder agreement handle the possibility of one partner wanting to exit?

An exit provision is among the most important things to address in a shareholder agreement, and it's easiest to negotiate before anyone actually wants to leave. A shareholder agreement should anticipate voluntary exits (a partner who simply wants to move on), involuntary exits (death, disability, insolvency, or a triggering event such as a criminal conviction), and forced exits (where the other shareholders want a particular person out).

For voluntary exits, the agreement typically requires the departing shareholder to first offer their shares to the remaining shareholders at a negotiated or formula-driven price. For involuntary exits such as death or permanent disability, a buyout mechanism funded by insurance is the most practical solution. For forced exits — sometimes called "drag-along" situations or specific event triggers — the agreement should define what events entitle the others to compel a sale, and at what price.

Pricing is often the most contentious issue. Common approaches include a fixed formula tied to earnings, a book value method, or an independent valuation by a named accounting firm. Whatever method you choose, agree on it now — it will be far harder to negotiate fairly when one party is actively trying to leave. A corporate lawyer can help you build exit provisions that are clear, balanced, and enforceable.