Definition
Tag-Along Rights
Tag-along rights let minority shareholders join a sale on the same terms when a majority shareholder sells their stake.
If a founder or major investor sells shares to a third party, tag-along rights allow minority holders to 'tag along' and sell a proportionate part of their holding on the same terms and price. This protects minorities from being left behind with a new controlling shareholder.
Tag-along (or co-sale) rights are the mirror image of drag-along rights and are a common protective term in startup shareholders' agreements, especially for early investors and key employees.
Related terms
- Term SheetA term sheet is the non-binding document that sets out the key terms of a proposed startup investment before definitive agreements are drafted.
- Secondary SaleA secondary sale is the sale of existing startup shares from one shareholder to another, rather than the company issuing new shares.
- Drag-Along RightsDrag-along rights let majority shareholders force minority holders to join in the sale of the company on the same terms.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.