Drag-Along Rights
Definition
Drag-along rights let a majority of shareholders force minority holders to join an approved sale of the company on the same terms, preventing small holders from blocking an exit.
How it comes up in fundraising
Standard in venture deals so an acquirer can buy 100 percent of the company once the board and majority approve.
Frequently asked questions
Are drag-along rights founder-friendly?
Broadly yes when thresholds are reasonable; they ensure a clean exit process. The details of who can trigger them matter.
What is the opposite of drag-along?
Tag-along rights, which let minority holders join a sale initiated by larger holders on the same terms.
Related terms
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