Tag along clauses are often sought by investors, so that a key shareholder (such as a founder) can’t sell its shares unless it finds a buyer willing to buy shares from all shareholders with tag along rights. Often, that means
finding a buyer willing to buy the entire company
.
What is the meaning of tag along right?
Tag-along rights also referred to as
“co-sale rights
,” are contractual obligations used to protect a minority shareholder, usually in a venture capital deal. If a majority shareholder sells his stake, it gives the minority shareholder the right to join the transaction and sell their minority stake in the company.
What does tag along right mean?
Tag-along rights also referred to as
“co-sale rights
,” are contractual obligations used to protect a minority shareholder, usually in a venture capital deal. If a majority shareholder sells his stake, it gives the minority shareholder the right to join the transaction and sell their minority stake in the company.
What is the difference between tag along and drag along rights?
A drag-along provision enables a majority shareholder to force a minority shareholder to join in the sale of a company. … Tag-along rights
do not require
a minority shareholder to sell; it simply gives them the option to tag-along and sell their shares along with the majority shareholder.
Are drag along rights common?
Yes
, in some instances. If preferred stockholders have the ability to approve a drag along, common stockholders can refuse to vote on the transaction until preferred stockholders waive their rights. However, this very situation is one of the reasons why drag-along became more widely used.
What’s another word for tag along?
| accompany follow | come along chaperon | convoy consort | go along go along with | attend keep company |
|---|
What is the meaning of tag along?
verb. tagged along; tagging along; tags along. Definition of tag along (Entry 2 of 2) intransitive verb. :
to follow another’s lead especially in going from one place to another
.
Which is better drag along or tag along?
Whereas a
‘tag along
‘ clause provides protection to small investors, a ‘drag along’ provision protects the interests of the major shareholder(s). A ‘drag along’ clause allows a large shareholder (or group of shareholders) to ‘drag’ the other shareholders into a joint sale of the entire venture.
What are registration rights?
A registration right is
a right entitling an investor who owns restricted stock to require that a company list the shares publicly so that the investor can sell them
. Registration rights, if exercised, can force a privately-held company to become a publicly-traded company.
What is pro rata right?
A pro rata right is
a right that is given to an investor that allows them to maintain their initial level of ownership percentage during later financing rounds
.
Why are drag along rights important?
The drag-along provision itself is important to the sale of many companies because buyers are often looking for complete control of a company. Drag-along rights
help to eliminate the current minority owners and sell 100% of a company’s securities to a potential buyer
.
What are customary exceptions to drag along?
“Drag–along” right: Subject to customary exceptions, if holders of [50
]% of the Preferred approve a proposed sale of the Company to a third party (whether structured as a merger, reorganization, asset sale or otherwise)
, [__________] will agree to approve the proposed sale.
How does drag along work?
A drag along right allows
a majority of shareholders to force minority shareholders to join the majority in a sale of the whole of the company to an unrelated third party
. The expression “drag along” comes from the idea that the minority shareholders are being forced against their will to sell their shares.
Minority shareholders have limited rights to benefit from the operations of a company, including
receiving dividends and being able to sell the company’s stock for profit
. In practice, these rights can be restricted by a company’s officers’ decision to not pay dividends or purchase shares from shareholders.
What is a good leaver bad leaver clause?
Good leaver bad leaver clauses are also known as shareholder employee dismissal and resignation clauses. … A good leaver is usually defined as an employee and shareholder of a company who dies, becomes incapacitated through physical or mental illness,
is made redundant or is unfairly dismissed
.
Can you force a sale of the shares?
There is no automatic right for the majority shareholders to force a sale by a minority shareholder
. Conversely, there is no automatic right for a minority shareholder to force the majority to buy their shareholding.
