Cross option agreement

by Practical Law Corporate (with thanks to Hugh Craig, formerly of Bates Wells & Braithwaite, for his comments)

A standard document providing a model cross option agreement for shareholders in a private company limited by shares, governed by the laws of England and Wales. This standard document is designed to facilitate business succession planning for owner-managers by establishing a clear framework for the transfer of shares upon a shareholder's death. It grants the surviving shareholders a Call Option to purchase the deceased shareholder's shares and gives the deceased's personal representatives and family members a Put Option to require the surviving shareholders to purchase those shares. A key feature of this agreement is the mechanism for funding the share transfer, where the purchase price is funded by life assurance policies that each shareholder takes out and writes in trust for the others. This standard document addresses the option period, exercise procedures, completion mechanics, and valuation principles, providing a structured approach for managing shareholder transitions.