What's In Your Ownership Agreement?

Sean Simpson
General Counsel –
Pipestone Management

Some Pipestone Management sow units have operated for a number of years, and the original owners want to transition their interests to the next generation. You may be wondering, “How do I do that?”, “Can I do that” or “How do I value my shares?”

In addition to traditional estate planning concerns, we’re in period of economic volatility during which there may be some contraction as well as expansion opportunities. You may want to sell your shares, buy more shares, get into a new unit, or consolidate. What does your agreement say on these subjects?

Finally, owners of a sow unit are responsible for staying informed of their options and for exercising control over the future of their jointly held assets. As a member or shareholder, you have the ability to engage in a healthy debate and change things for the better during the new business portion of any shareholder or member meeting.

All of the above actions will be in some manner dictated by what is in your member or shareholder agreement.

Some of you have interest in just one sow unit. Others have interest in more than one. The various agreements among the Pipestone Management farms may contain similarities, but they may also contain differences. These differences may affect how you interact with other owners in the future. It’s particularly important to understand these differences if you plan to sell your shares or transition them to others in your family.

For instance, in case of divorce or estate planning, you will want to determine if the agreement includes a formula to value your interest in the sow unit or if the sow unit has an obligation to buy back your shares upon the occurrence of certain events, like death, disability, divorce, or bankruptcy. The member or shareholder agreement also spells out your obligations as an owner. For instance, if the farm runs into financial difficulty, you may be required to put in more money or personally guarantee a note or loan. This may come as a shock to some who have never read their agreement.

I encourage everyone to locate your agreements. If you can’t find the originals, contact Sharon Jacobson at (507) 825-7028 or e-mail her at sjacobson@pipevet.com. She will provide you with copies. Then sit down and review these agreements with an eye toward resolving any misconceptions you may have had. Take the agreements to your lawyer, your tax preparer, or your accountant and see if their provisions are consistent with your individual estate planning goals.

These agreements are your roadmap to the future; but, like a highway map, you must pull it out of the glove compartment and read it to be sure of where you are going.