Full Definition
Tag-along rights (also called co-sale rights) protect minority shareholders by giving them the right to participate in any sale of shares by a majority shareholder, on the same terms and conditions. This prevents majority shareholders from selling their stake without giving smaller shareholders the same opportunity.
How Tag-Along Works
- If a majority shareholder finds a buyer for their shares, minority holders can "tag along"
- Minority shareholders sell their proportional share at the same price
- Protects smaller investors from being left behind in a secondary sale
- Standard protection in VC investment documents
Real-World Example
When a founder negotiates to sell 20% of their personal shares to a secondary buyer, tag-along rights allow other seed investors to sell a proportional amount at the same price.
Related Terms
A provision allowing majority shareholders to force minority shareholders to join in the sale of a company.
A non-binding document outlining the key terms and conditions of a proposed investment deal.
A class of shares with special rights and preferences over common stock, typically held by investors.
A marketplace where existing shareholders can sell their private company shares to other investors before an IPO.
A planned approach for founders and investors to realize returns on their investment in a company.
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