Glossary
Tag-along rights
A provision giving minority shareholders the right to sell their shares on the same terms if the majority sells, so that they are not left behind in a company with a new owner.
In plain English
Tag-along rights are the counterpart to drag-along rights. Drag-along lets the majority require the minority to sell; tag-along lets the minority insist on being included. Together they make sure a sale of the company is a sale for everyone, on the same terms.
They matter to founders who hold minority stakes, to employee shareholders and to investors.
Why it matters
Buyers prefer to acquire all the shares, and tag-along rights help deliver that. Sellers need to know who holds them and how they will be exercised.
What to watch for
- Check the shareholders' agreement and articles before a process.
- Consider the position of option holders.
- The rights are usually triggered by a sale of a defined majority.
Transaction language and legal treatment depend on the agreement and the jurisdiction. Written by Motion Advisory Partners as general guidance, not legal advice.