From Idea to Exit: Structure - For Cause Repurchase Rights

You know how hard it is to build a successful business. Our business lawyers want to make sure that entrepreneurs and small business owners have every advantage possible in making that happen.

A solid and secure legal foundation is a crucial component to doing so, and that is why your operating agreement or your bylaws are so critical to your business. In previous posts, we discussed methods of ensuring that your business can control your company’s equity in a way that allows the company to grow, develop, and reach its potential.

Considering this theme, a provision that we as business attorneys advise our clients to include in their operating agreements or bylaws is a for-cause repurchase right.

https://youtu.be/ZBX-UOqy1Qs

Protection from Bad Actions

For-cause repurchase rights protect the business when owners make actions that are not in the company’s company’s best interest. The for-cause repurchase rights allow the company to distance itself from that owner and purchase that owner’s equity back.

An example of an action that is not in the company’s best interest is if an owner of the business is convicted or engages in an activity that could lead to a conviction of a misdemeanor or felony-level criminal offense involving fraud, embezzlement, or dishonesty. By having this provision, the company can elect the right to repurchase that owner’s equity.

Another common trigger in a for-case repurchase clause is if there's a material breach that goes uncured of the operating or shareholder agreement or other agreement between an owner and the company. The threat of losing your equity creates an additional incentive for owners to comply with their contracts and obligations to the company.

Ability to Rebuy Equity

The idea is that if someone does something that materially hurts the company, then the company needs to be able to repurchase that bad actor’s equity. There is no room on the cap table for deadweight, and there is no reason that they should ever benefit further from you building your business.

We even regularly add a provision that allows for the company to buy the equity at a reduced rate, typically at about 50% of the fair market value of that owner’s equity. The percentage discount can change depending on how big of a disincentive they want to set for bad-actors. As a result, we regularly see the discount spanning between 20% and 80%.

As these are common aspects that go into a for-cause repurchase right, it's something that each company should carefully evaluate having in their operating agreement or bylaws.

The business attorneys at Freeman Lovell love assisting entrepreneurs and small-business owners understand, mitigate, and take the right legal risks in their operating agreements and bylaws.

Call or text us at (385) 217-5611 or send us a message through our , Contact Form .

You can also access all of our presentations on this section to learn more about how you can build your business and how we will clear the way for your success from idea to exit at this LINK .

< Older Post Newer Post >

Received a Notice of Proposed Discipline? 3 Steps Federal Employees Must Take Now

By Adrienne Langmo • April 21, 2026

Receiving a Notice of Proposed Discipline, particularly of a proposed removal, is one of the most stressful experiences a federal employee can face. Whether you work for the Veterans Administration, Internal Revenue Service, Department of Defense, or U.S. Forest Service your career, pension, and livelihood are suddenly on the line. Panic is a natural reaction, but it is not a strategy. If you have been handed proposed discipline, here are three steps you must take immediately. 1. Check Your Deadlines In the federal sector, the clock starts ticking the exact moment you receive your notice. Federal employees typically have only 7 to 14 days to submit a formal response. Missing this strict deadline forfeits your right to defend yourself before a final decision is made. 2. Request the Evidence File Your agency cannot simply fire you without proof. You have the absolute right to review the materials they relied upon to propose your removal. We scrutinize this evidence against a set of aggravating and mitigating factors, often called the "Douglas Factors," to determine if a penalty is appropriate. Often, agencies overreach, and a strong defense can expose that. 3. Secure Your Right to Reply In response to most forms of discipline, you have the right to provide both a written response and an oral reply to the Deciding Official. Having legal counsel on your side ensures your response is strategic, professional, and focused on mitigating the penalty or stopping the disciplinary action entirely. The Takeaway: Federal employment law is a highly specialized field. A general, private-sector employment lawyer often does not know the unique rules, acronyms, or administrative courts governing federal employees. You need counsel with specific experience dealing with federal agencies. At Freeman Lovell, we have our very own experienced Federal employment law practitioner, Adrienne Langmo. If you have received a Notice of Proposed Discipline, don’t navigate it alone—contact Adrienne Langmo today for experienced guidance and help.