SHOTGUN! You Should Know This Before Triggering A Buy-Sell Provision

There are important lessons in a recent Ontario Court of Appeal decision examining shotgun buy-sell provisions, and in particular, the enforceability of a buy-sell offer that does not perfectly comply with the terms and conditions of the shotgun provision.

Unanimous shareholder agreements, partnership agreements, and joint venture agreements often contain what is commonly known as a "shotgun buy-sell provision", which provides a mechanism for involuntarily expelling one or more parties from the business venture when the business relationship between them sours.

Briefly, a typical shotgun mechanism works as follows:

• the offeror triggers the provision by concurrently making both an offer to buy the offeree's interest in the business venture and an offer to sell its own interest to the offeree;