Bullet Clause Law and Legal Definition

A bullet clause is one under which one of the co-owners of a business can specify the price either at which the others can buy him/her out or at which he/she can buy the others out. Hence, if the co-owner exercising the bullet provision sets a price unreasonably high, the others will choose to sell to him/her. On the other hand, if the price is unreasonable low, presumably the others will exercise the right to buy out the owner exercising the bullet provision. Bullet clause can be used as an effective method to get the owners to agree on a mechanism designed to prevent or inhibit sales to outsiders.