Tag-Along Rights
Definition
Tag-along rights let minority shareholders join a sale initiated by a majority holder, selling their shares on the same terms rather than being left behind as a minority owner in a company under new control.
How it comes up in fundraising
Tag-along rights protect smaller investors and early employees when founders or a large shareholder sell their stake, and they are the mirror image of the drag-along rights that protect the buyer.
Frequently asked questions
How are tag-along rights different from drag-along rights?
Tag-along protects minority holders by letting them opt into a sale. Drag-along protects the majority and the buyer by forcing minority holders to join a sale they might otherwise block.
Do tag-along rights apply to every sale?
Usually only to sales above a defined ownership threshold by specific shareholders, as set out in the company’s shareholder or investor rights agreement.
Related terms
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