What Does “Tag-Along” Mean in a Contract?
Rights allowing minority shareholders to join in a sale by majority shareholders, selling their shares on the same terms.
Detailed Explanation
Tag-along (co-sale) rights protect minority shareholders from being left behind when majority shareholders sell. If the majority gets a good deal, minorities can participate rather than being stuck with the remaining company.
Tag-along is the minority-protective counterpart to drag-along. It ensures fair treatment—if someone's getting out at a good price, everyone gets the same opportunity.
Example in a Contract
“If any shareholder holding more than 10% proposes to sell shares to a third party, other shareholders may participate in the sale on a pro-rata basis on the same terms and conditions.”
Why It Matters
Without tag-along rights, controlling shareholders could sell to someone who treats minority shareholders poorly, or sell the most valuable portion while you're stuck with what remains. Tag-along ensures equal opportunity.
Related Terms
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