Tag-along rights are a contractual right that allows minority shareholders to participate proportionately in an offer to sell the shares of the company. This right gives minority shareholders the ability to sell their shares at the same price and on the same terms as the majority shareholders. This ensures that minority shareholders are not left behind in the event that the majority shareholders decide to sell their shares. Tag-along rights are typically found in the shareholders' agreement of a company.
What are piggyback rights? Piggyback rights refer to the right of an investor to participate in future rounds of financing for a company in which they have invested, in proportion to their initial investment. This right allows investors to maintain their equity stake in a company as it raises additional capital, and can be a valuable tool in negotiating for a larger ownership stake in a company. Piggyback rights can also be used to protect an investor's interest in a company in the event that the company is sold or goes public.
Can a minority shareholder sell their shares? The answer to this question depends on the type of minority shareholder you are talking about. If you are referring to a shareholder who owns shares in a privately held company, then the answer is generally yes, they can sell their shares. However, if the company has a shareholders' agreement in place, there may be restrictions on when and how shares can be sold. For example, the agreement may stipulate that shares can only be sold with the consent of the majority shareholders.
If you are referring to a minority shareholder who owns shares in a publicly traded company, then the answer is a bit more complicated. While minority shareholders are typically free to sell their shares on the open market, they may be subject to certain restrictions, such as insider trading laws.
How does drag along rights work?
Drag along rights are a contractual provision typically found in the shareholders’ agreement of a company. They give the majority shareholder(s) the right to force the minority shareholder(s) to sell their shares in the company to a third party if the majority shareholder(s) decides to sell their shares.
The purpose of drag along rights is to protect the interests of the majority shareholder(s) by ensuring that they can sell their shares in the company on the same terms as the minority shareholder(s). Drag along rights also protect the buyer of the shares by ensuring that they will be able to acquire all of the shares in the company.
There are various types of drag along rights, but the most common type is the “simple drag along right”. This gives the majority shareholder(s) the right to force the minority shareholder(s) to sell their shares to a third party if the majority shareholder(s) receives a bona fide offer from a third party to purchase all of the shares in the company.
The majority shareholder(s) must notify the minority shareholder(s) of the offer and give them an opportunity to sell their shares on the same terms. If the minority shareholder(s) refuses to sell their shares, the majority shareholder(s) can sell their shares to the third party without the minority shareholder(s). What is another word for tag along? The phrase "tag along" is often used in the private equity and venture capital industries to describe a situation in which one company follows another company's lead in making an investment. For example, if Company A invests in a new startup, Company B may choose to "tag along" and also invest in the startup.
What is a drag and tag clause?
A drag and tag clause is a clause that is typically included in a private equity or venture capital investment agreement. The clause gives the investors the right to "drag" the company into an initial public offering (IPO) and to "tag" along with the company if it is sold.