We are agreeing to carry a seller note for twenty percent of the purchase price, but we want an immediate seat on the buyer's board or direct oversight of their leadership team if they miss a payment. How do we structure this operational oversight to protect our financial position?

Question

Tyler Smith · Accepted Answer

Carrying a seller note means you are acting as a bank, but without a bank's massive legal department. If the buyer defaults or begins running the company into the ground, waiting for a standard legal remedy will leave you with a bankrupt business. You need immediate, proactive operational intervention rights written directly into the note and the purchase agreement.

Negotiate a covenant that triggers operational oversight the moment a payment is missed or a key financial covenant is breached. This oversight should grant you immediate board observer rights or a voting seat on their governing board. More importantly, build in a clause that allows you to attend their weekly leadership meetings, styled after the EOS Level 10 Meeting, to monitor their scorecard and cash flow in real time.

You must also include a clear management clawback provision. If a default is not cured within thirty days, you must have the right to replace key operational leaders or install an interim manager. By structuring your seller note with these active operational triggers rather than passive legal remedies, you force the buyer to remain transparent and accountable. This protects your cash flow and ensures you can step in to steer the ship before they destroy the value of your legacy business.