Mandatory Buy-Out Agreements for Stock of Closely Held Corporations

Abstract

A buy-out of a shareholder's stock is a sale of his stock holdings in a specific corporation pursuant to a pre-existing contract. The focus of this Article is on mandatory agreements taking effect upon the death of a shareholder. The purpose of this Article is to delineate some of the most important tax and corporate law considerations and to examine various methods of financing buy-outs. It will place particular emphasis on the merits and disadvantages of funding by means of life insurance.

Keywords: Taxation, Buy-Out, Closely Held Corporation, Life Insurance

JEL Classification: H20, H25