Legal Definitions - continuation agreement

A continuation agreement is a legal agreement made among partners in a partnership that allows the business to continue operating without the need for liquidation in the event of dissolution. This agreement is usually made to ensure that the business can continue even if one or more partners leave the partnership.

For example, if a partnership has three partners and one partner decides to leave, the continuation agreement will allow the remaining partners to continue operating the business without having to dissolve the partnership and sell off its assets.

Continuation agreements may also include provisions for purchasing the interest of a deceased or expelled partner. However, this provision is not always necessary, and courts have enforced agreements that give the estate of the deceased partner nothing.

Overall, a continuation agreement is an important legal document that helps ensure the continuity of a partnership's business operations in the event of dissolution or the departure of one or more partners.