Fax Mark Tag-Along Agreement For Free

The drag along clause requires the minor shareholder to sell their shares. The tag along clause requires the minor shareholder to be allowed to join in on a sale. Both clauses are designed to give the minor shareholder the rights to receive the same price, terms and conditions as any other seller.

Rights of first refusal are often paired with co-sale rights (also known as tag-along rights). Co-sale rights give the holder the option to participate in the sale of the startup?or any other liquidation event?on equal terms as the other parties involved.

Summary. Drag-along and tag-along rights are contractual obligations which operate to protect both minority and majority shareholders in a company.

The drag along clause requires the minor shareholder to sell their shares. The tag along clause requires the minor shareholder to be allowed to join in on a sale. Both clauses are designed to give the minor shareholder the rights to receive the same price, terms and conditions as any other seller.

Drag-along rights and tag-along rights are important forms of investment realisation in a shareholders agreement. Drag-along rights favour the majority shareholder while tag-along rights are more beneficial to the minority shareholder.

The right to drag along ensures that the sale of the company is not obstructed by the minority shareholders. It ensures that no piece of the share is left behind. Drag-along rights are mostly encompassed in agreements of private companies and subsumed when the private company changes into a public.

The investor finds a buyer who wants to purchase the entire 60% stake for $30 a share. The tag-along rights negotiated by the three co-founders give them the ability to include their equity shares in the sale.