Tag-along rights protect minority shareholders by giving them the right to join a sale when majority shareholders sell their shares. If a majority shareholder negotiates a sale of their stake, tag-along holders can include their shares in the transaction at the same price and terms. This prevents majority holders from selling at a premium while leaving minority holders with illiquid shares in a company they may no longer control.
Tag-along rights protect minority shareholders (often founders or employees) from being left behind in a sale. If a majority shareholder sells, minorities can tag along on the same terms.
Ensures that if investors sell their stake, founders have the option to sell proportionally rather than being stuck with illiquid shares in a company they may no longer control.
When a majority shareholder negotiates a sale of their shares, minority holders with tag-along rights can include their shares in the transaction on the same price and terms.
The buyer must purchase the tagged shares or reduce the majority seller proportionally.
Tag-along rights may not apply in all sale scenarios (e.g., transfers to affiliates).
Not exercising tag-along within the notice period (typically 15-30 days) forfeits the right for that transaction.
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