Tag-along rights definition
/What are Tag-Along Rights?
Tag-along rights give a minority shareholder the right to take part in a transaction to sell shares in a company, at the same price and terms as the majority shareholder. These rights are needed to keep the minority shareholder from being left behind when the majority shareholder sells its stake in a business, leaving the minority shareholder with no way to liquidate its investment. Tag-along rights are negotiated when the minority shareholder first buys shares in a business, and are commonly included in stock purchase agreements for startup companies or any other businesses in which there appears to be a strong possibility of share price appreciation.
Smaller investors, such as angel investors and venture capital firms, insist on tag-along rights to ensure that they can cash out of their positions when a buyer is interested in acquiring a company in which they have an ownership position.
Terms Similar to Tag-Along Rights
Tag-along rights are also known as co-sale rights.