When you are investing in a company, especially a privately held company, you may want to buy out your majority shareholders. This process would give you more control over the company. If minority shareholders buy out the majority shareholders, then the minority shareholders become the majority shareholders. However, this cannot happen automatically.
Process
Buying out majority shareholders requires capital. You may buy out majority shareholders upon the death of a majority shareholder through a buy/sell agreement. This agreements must have been in place prior to the death of the majority shareholder or shareholders. Buying out shareholders while they're alive merely requires that they sell you their shares.
Significance
Buying out majority shareholders means you may become the majority shareholder in the company. This happens when you control at least 51 percent of the company's stock. Because each share of stock gives you one vote on all corporate matters, you will always outvote all other shareholders, even if they are all aligned against you. This effectively gives you total control over the direction of the company.
Benefit
With a majority stake in a company, you may run the company any way you wish. For private companies, you may even assume direct control by voting yourself CEO of the company. You may also initiate a vote to replace the current CEO of the company with someone other than yourself.
Consideration
The majority shareholder in the company must agree to sell you his shares. You cannot force a sale of shares from the majority shareholders. If you own more than 5 percent of the stock of a publicly held company, you must disclose this information according to the Securities and Exchange Commission's rules concerning filing requirements for publicly traded stocks.
