The Disability Buyout Agreement is a crucial business continuity planning tool used in Canadian businesses where multiple owners are actively involved in operations. This document becomes essential when owners want to establish a clear framework for handling ownership transition in the event of a partner's disability. The agreement typically includes detailed provisions for disability definition, medical evaluation procedures, valuation methods, funding mechanisms (often through disability insurance), and payment terms. It ensures compliance with Canadian federal and provincial regulations regarding disability rights, privacy laws, and tax implications. The agreement helps prevent potential disputes and maintains business stability by providing a predetermined path for ownership transition, protecting both the disabled owner's financial interests and the continuing owners' operational control.

1. Parties: Identification of all parties to the agreement, including the business owners and the business entity

2. Background: Context of the agreement, existing business relationship, and purpose of the disability buyout arrangement

3. Definitions: Key terms including 'Disability', 'Triggering Event', 'Purchase Price', 'Business Interest', and other relevant definitions

4. Disability Determination: Process for determining disability, including medical evaluation requirements and appeal procedures

5. Purchase Obligation: Mandatory obligation to purchase/sell upon disability trigger and any conditions precedent

6. Valuation Method: Mechanism for determining the purchase price of the business interest

7. Payment Terms: Structure and timing of payments, including any installment arrangements

8. Funding Method: Details of disability insurance policies or other funding mechanisms

9. Transition Provisions: Management transition process and interim operation procedures

10. Representations and Warranties: Standard business and personal representations by all parties

11. Tax Matters: Tax treatment and allocations related to the buyout

12. General Provisions: Standard clauses including notices, amendments, governing law, etc.