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Drag along and tag along rights



Fri 29 December 2023 Drag along and tag along rights

What are tag along and drag along rights?

Tag along and drag along rights are crucial clauses frequently found in shareholder agreements, particularly for privately-held companies. Tag along rights benefit minority shareholders whereas drag along rights are valuable for majority shareholders.

Tag along rights allow minority shareholders to sell their shares on the same terms as controlling shareholders when they exit the company.

Drag along rights are a way for majority shareholders to force all other shareholders to sell their shares alongside them at a predetermined price and terms. The rights enable a smooth exit and the ability to find a single buyer for the entire business, making it more attractive to potential acquirers.

Important Considerations

As with all legal matters and issues, the details are important. There are many variables with drag or tag clauses, which will often centre around :-

Variables are highly negotiable and should be tailored to the specific needs of the company and its shareholders to ensure a fair and equitable exit strategy for all parties involved.


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