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Minority investors often purchase interests in private companies without securing a buy-sell agreement (BSA) at the time of their investment. After a few years pass, however, the minority investor and the majority owner may both want one, but for different reasons. The majority owner may desire to redeem minority interests in the company held by smaller investors, which will then enable the owner to offer a larger stake in the business to just one, well-funded investor.  The investor may want to secure an off ramp to be able to monetize the investor’s minority interest in the company at some point in the future.

When the business goals of majority owners and minority investors align, these partners can create a BSA in the nature of a post-nuptial agreement, which they enter into long after the purchase of the minority interest. This post reviews how to structure these after-the-fact BSAs between existing business partners.

Why Partners Consider a BSA Long After the Investment

When majority owners and minority investors first begin to see the need for a BSA years down the road, it is because they did not consider their long-term business goals at the time of the initial investment. The majority owner may have focused on the company’s immediate capital needs while the minority investor’s primary focus was on evaluating the quality of the business and whether to go forward with the investment. 

With the passage of time, however, the majority owner may conclude there are too many small investors in the company and the owner may therefore want to secure the right to redeem some of them to regain control over the company cap table. At the same time, the minority investor may realize that without a BSA in place, the investor will have to wait for some type of liquidity event to take place to be able to monetize the interest held in the company.  In short, the minority investor may want to secure a contract right to demand a repurchase of the investor’s interest in the business.

Under these circumstances, the parties’ separate but aligned interests may open the door for them to discuss negotiating and adopting a BSA. This post-nup BSA will allow each of them to achieve their business goals well after the investment was made. Reaching this type of agreement will be possible, however, only when the relationship between the partners is not already in crisis.

Key Features of the After-the-Fact BSA

There are four key components of the type of BSA that business partners enter into after-the-fact. These are (1) the timing, i.e., when either party is permitted to trigger the buyout right provided by the BSA, (2) the method for valuing the minority interest, (3) a look- back provision that protects the minority investor whose interest is being redeemed, and (4) the structure of the payment to be made for the purchase of the minority interest. 

The last two of these provisions are common in all BSAs, and we have covered them in a previous post that can be accessed here. We will therefore address just the first two, the timing of the parties’ right to trigger the BSA and the importance of the look-back provision. The partners who enter into the BSA after the initial investment will not want to permit the BSA to be triggered right away. If an immediate buyout was desired, the partners would simply negotiate the purchase of the minority interest, and they would have no need to create a BSA to be triggered in the future.

Thus, this type of BSA will include a delayed trigger, which means that neither of the partners will be permitted to trigger the BSA for a period of years, and the specific length before the trigger is permitted is subject to negotiation. It generally falls in the range of two to four years, and after this time period passes, each partner will have the option to trigger the BSA and require a redemption or buyout of the minority interest.    

The look-back provision specifies that if the majority owner triggers the BSA and then redeems the interest held by the minority investor, the investor will have a protected period of time (often for at least one year) after the redemption. During the protected period, if any transaction takes place at a higher share value than the minority investor received, e.g., if there is a sale of the company or a new investment in the business, the investor will receive an equalizing payment based on the value of the transaction during the protected period. In short, the investor does not have to worry that shortly after its interest was redeemed, the majority owner sold the business for a much higher value. 

Conclusion

The failure to obtain a BSA when an investment is made does not foreclose either the company’s majority owner or the minority investor from raising this new agreement as a possibility years later. But if the relations between the partners have deteriorated over time, the prospect of securing a post-nup BSA becomes remote at best. Therefore, business partners who are interested in potentially entering into an after-the-fact BSA need to act before the window closes as it likely will not stay open forever.

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The use of AI has been a boon for business owners, because it enables them to analyze large amounts of data quickly and inexpensively, which accelerates their decision-making process without the need to consult others. This expansive, fast input can make it appealing for business owners to consider replacing their human business partners with an AI subscription, i.e., securing the same wisdom but without any hassles. The temptation to jettison human partners for an AI substitute, however, poses serious risks, including (1) the loss of access to capital, (2) the lack of real-world experience that challenges the owner’s views, and (3) increasing the isolation that many business owners already feel in leading their companies. This post reviews benefits for business owners who incorporate AI into their operations but also considers negative outcomes that may result if owners abandon their human partners and place sole reliance on digital guidance.

The Benefits of Implementing AI for Business Owners

The targeted use of AI provides business owners with significant value.  AI tools can quickly analyze data regarding sales, pricing, manufacturing, labor and other costs, and they can also provide owners with detailed financial projections and guidance on a 24/7 basis regarding strategic options that are available to expand their business. The incredible speed at which AI processes information permits business owners to make decisions on an expedited basis. The takeaway is that business owners can deploy AI tools to improve their bottom line by achieving cost cutting or increasing profits, or some combination of the two.

But if business owners opt for the use of AI in a way that eliminates or sharply reduces the role of their human partners, this decision can lead to dire consequences for the business, which are discussed below.

Loss of Access to Capital

As businesses grow, they often need to secure additional capital to fund the costs of their expansion and avoid becoming burdened by excessive debt. That is one of the reasons why a private company owner may add business partners who can contribute capital, as well as opening doors to other new sources of capital for the business. 

While AI is a helpful digital resource that can identify potential new sources of capital for the owner to consider, AI cannot directly open doors for business owners to secure capital from human partners. Stated another way, AI cannot write checks, and securing an AI subscription will not create introductions to a new network of friends and colleagues who have capital to invest in the business. As a result, an AI strategy that deemphasizes human partners may close off or reduce access to new capital sources the business needs to expand.

Lack of Real-World Experience

AI has vast amounts of knowledge and analytical capacity, but it does not provide input based on actual life experience. Experience in life is often the best teacher, but AI has not gone through a market downturn, laid off employees or scaled back a business in response to adverse market conditions. We learn more from our mistakes than our successes, and partners who have experienced setbacks have invaluable life experience they can tap into, which they can rely on to help business owners avoid repeating the same costly mistakes the partner made in the past.

A couple of examples may help make this clear. AI can evaluate a resume and point out the pros and cons of a potential lateral hire for a management position. But a business partner who has experience in the industry will have a strong sense of what personality and skill set is necessary for success, and in addition, the partner may have industry contacts who know the candidate and may be able to offer inside information about the specific applicant. This type of real-world experience may help avoid hiring someone who would be a disaster for the business.

Similarly, AI can analyze various performance indicators, compare compensation structures, and offer guidance to the business owner about how to create a strong company culture. But an experienced business partner can assess what is not working in the company’s culture and offer suggestions that will help build a more vibrant and cohesive work environment. From popular culture, the recent Top Gun remake featured Tom Cruise taking his pilots to the beach for a touch football game. The flight commander wanted the pilots back in the classroom, but Cruise’s character knew that team bonding on the beach would bring them closer when it counted. Here, AI may offer ideas that make sense on paper without appreciating what truly fosters human connection. 

The Echo Chamber Effect — AI as Cheerleader

Depending on the AI model, the results may be supportive without offering hard-hitting and necessary critique. AI is a composite of huge amounts of data that can be analyzed at breakneck speed. But it does not have skin in the game as it has not invested time or money in the business, and it could be weighted toward confirmation bias. When a critical decision requires the application of informed judgment rather than mathematical certainty, does the business owner want to trust the information that AI provides to one of its subscribers? Or would the owner place more trust in advice offered by someone who shares the same risk of success or loss in the business?

In short, human business partners are likely to be more accountable than AI on key decisions such as the hiring or firing of employees, investing in new areas of the business, or deciding on which potential new business partners to bring into the business. Will AI provide the business owner with a firm “no” when a key decision has to be made, and if so, will the answer be trustworthy? Ultimately, the business owner must decide whether to accept advice that is being offered solely by AI or whether to insist on also obtaining thoughtful input from another experienced businessperson. 

Isolation and Its Consequences

A final issue for the business owner to consider is whether using AI to the exclusion of human partners will become more isolating. Running a business can be lonely when the buck stops with the owner who has to make final decisions frequently. A business owner who consults solely with AI in making decisions to the exclusion of human partners may become more disconnected and disengaged, which is not healthy. A study conducted by the University of California, San Francisco, found that 49% of entrepreneurs deal with at least one mental health condition. Common issues include anxiety, depression, and burnout.

AI can help the business owner make decisions far more promptly. But creating a business model that involves seeking collaboration and consensus with others who are part of a management group can create a much stronger sense of teamwork for the owner and the company as a whole. Engaging in this collective teamwork also will help the business owner avoid experiencing burnout and depression.

Conclusion

AI is here to stay. The benefits it provides for business owners are profound, and its ease and accelerated delivery of results add to its utility. But jumping on the AI bandwagon should not lead business owners to dispense with their human business partners, whose real-life experience, extensive contacts, and wisdom add value to the company in a host of different ways. The balance that can be struck here, instead, is for business owners to use AI tools to enhance the work they do with their business partners, whose wise input can make the use of AI even more positive and impactful for the business.

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Doing the same thing generally produces the same result, and as the new year arrives, many business owners are considering new steps to help their companies achieve greater success in the year ahead. Leveling up requires change, and this post reviews three resolutions majority owners can implement to obtain better outcomes during 2026 for their companies and also for themselves.  Specifically, these resolutions should incentivize employee productivity, improve the company’s governance structure and help the majority owner become a more effective leader.

Resolution 1: Provide Employees With Phantom Equity or Stock Appreciation Rights

Providing employees with performance incentives is a common way for companies to boost productivity. Bonus structures are typically geared toward individual performance and may not correlate directly correlate with improved results for the company as a whole.  However, other incentive tools are available that more closely align employee rewards with the company’s broader productivity and performance goals. 

One such option is issuing phantom equity or stock appreciation rights.  These incentives do not involve an actual award of stock and do not provide employees with true equity in the business.  Instead, employees receive contractual rights that entitle them to additional payments based on the company’s performance.  Typically, these agreements provide for additional compensation if the company achieves specific revenue or growth targets.  When the company succeeds under these agreements, employees share in that success. 

Providing phantom equity aligns employee performance more closely with the company’s goals while avoiding complications associated with granting actual equity. As discussed in other posts, employees who hold equity in the business may have the right to access company books and records, assert fiduciary duty claims against leadership, and require the company to buy out their interests upon departure. 

Resolution 2: Refresh The Company’s Board or Managers

Private companies often do not operate with the same level of formality as large corporations, which can be beneficial. Less formality allows them to be more flexible, make quicker decisions, and benefit from closer communication among leadership. However, it can also result in little to no turnover at the board or management level, particularly when no defined terms of service exist for those serving in these positions.

When the same board members or managers remain in place for extended periods, stagnation can occur. A lack of fresh perspectives may lead to diminished energy, lack of vision and creativity for the business. To address this, the majority owner should conduct an objective assessment of the current board or management team to identify areas where additional expertise or stronger input is needed.

For example, the owner should evaluate whether the company’s current leadership adequately supports  the business in the following key areas: (i) finance and accounting, (ii) technical expertise, (iii) sales and marketing, (iv) strategic planning and (v) legal matters. If gap exists, the owner may consider transitioning one or more current leaders or expanding the board or management team to bring in new voices. 

Strengthening the leadership group can have a significant positive impact. Beyond introducing new ideas or experience, fresh perspectives reduce the likelihood that the company’s existing practices will simply be rubber-stamped. New board members or managers can inject energy and challenge stale assumptions in ways that existing leadership may not.

Resolution 3: Invest in the Owner’s Own Development as a Leader

In private companies, majority owners often wear many hats, making it challenging to oversee multiple areas of responsibility. This challenge is even greater when owners lack peers who can provide support, feedback and accountability.  Over time, access to trusted external input becomes invaluable for business leaders.

There are many ways majority owners can obtain this type of guidance, including organizations such as Vistage or Entrepreneurs’ Organization, executive coaching and other leadership development programs. Without this support, both the owner and the company may hit a ceiling that is difficult to overcome. Additionally, owners lack external support face a significantly higher risk of burnout due to the pressure of feeling solely responsible for the company’s success. 

Conclusion

The new year brings potential for change and growth, but repeating the same actions while expecting different results remains a flawed approach. Majority owners who want to elevate both themselves and their businesses must be willing to embrace change to achieve better outcomes. The three resolutions discussed here offer pathways to improved employee productivity, a more dynamic and experienced leadership team, and a stronger support system for the majority owner. Majority owners who act on these resolutions in 2026 will position themselves and their companies for success this year and beyond.