GLOSSARY

Cross-option agreement definition

What does Cross-option agreement mean?

An agreement entered into by the shareholders of a company, under which each shareholder grants to the other shareholders put and call options over their shares which are exercisable on death (ie under the call option, the remaining shareholders have the right (but not the obligation) to purchase the deceased shareholder's shares from its personal representatives; and under the put option, the deceased shareholder's personal representatives have the right (but not the obligation) to require the remaining shareholders to purchase the deceased shareholder's shares). Each shareholder takes out a term assurance policy under which any amount which becomes payable is held on trust by the continuing shareholders to pay for the deceased's shares. Such a policy should be entered into by each shareholder and written under trust, with their fellow shareholders as beneficiaries.

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