A buy-out of a shareholder's stock is a sale of his stock holdings in a specific corporation pursuatnt to a pre-existing contract. In recent years such arrangements have, deservedly, become an increasingly popular planning device for shareholders in closely held corporations; they make it possible to limit the class of potential shareholders, provide liquidity for the estate of a deceased shareholder, and establish a value for stock which has no active market. There are two popular categories of buy-out plans. If the prospective purchaser of a decedent's shares is the corporation that issued them, the plan is called an "entity purchase" plan, a "stock retirement" plan, or a "stock redemption" agreement. If the surviving shareholders are to purchase the decedent's stock, the plan is referred to as a "cross-purchase" agreement. A given plan may combine both types by providing that the corporation will redeem some of the shares and that the surviving shareholders will purchase the remainder.
Kahn, Douglas A. "Mandatory Buy-Out Agreements for Stock of Closely Held Corporations." Mich. L. Rev. 68 (1969): 1-64.