Bold symbol in the Tag-Along Agreement

Aug 6th, 2022
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How to bold symbol in the Tag-Along Agreement

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a tag along right is a contractual agreement youd make with all of your partners Founders investors that permits uh if if one party is for example going to sell their Equity to an unrelated third party uh the tag along right would permit certain parties to tag along in the sale and ALS o realize some cash out value to their to their Equity so it prevents say one of your Founders from cashing out of your company without bringing you guys along um for the for the uh liquidity event so the tag along allows a party to tag along in a sale so that they can also realize some liquidity or cash to their uh equity

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A drag-along right enables a majority shareholder to force a minority shareholder to join in the sale of a company. During the sale of a company, prospective buyers are often looking for complete control of the target firm. There are benefits for both majority and minority shareholders with drag-along provisions.
The phrase Tag Along means to follow along after someone; to go along with someone. Example of Use: The family dog tagged along after the children wherever they went.
Drag-along rights can be instituted through capital fundraising or during merger and acquisition negotiations. If, for example, a technology startup opens a Series A investment round, it does so to sell ownership of the company to a venture capital firm in return for capital infusion.
For example, if you own 10% of the companys shares and you have a tag along right, you would be given the opportunity to sell 10% of the total parcel of shares that are being sold. This type of clause would typically result in shareholders selling some of their shares, but none of them being able to sell all of them.
For example, if a third party offers to buy out a company and the majority shareholder wish to accept the deal, a drag-along right will ensure that minority shareholders accept the buy-out.
The drag along clause requires the minor shareholder to sell their shares. The tag along clause requires the minor shareholder to be allowed to join in on a sale. Both clauses are designed to give the minor shareholder the rights to receive the same price, terms and conditions as any other seller.
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.

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