Cut line in the Tag-Along Agreement effortlessly

Aug 6th, 2022
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How to Cut line in the Tag-Along Agreement

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hi im matt crowley this particular webinar is going to be on tag along and dragged along rights this will be a short one but it will be pretty important so for shareholders that are entering it either a buy sell agreement or perhaps an investor rights agreement or just an agreement among their co-founders on how theyre going to treat each other its important to consider how to handle situations where youre either in the minority or youre in the majority in terms of the number of shares you have when you think about the exit so when Ive talked about the exit Im not thinking about the companies going public Im thinking about someone acquiring your company most of the time the acquire is going to buy the assets of your company thats the reality but in the event that you managed to sell you the company and the buyer wants to buy the stock or the membership interests whatever form of equity you have if Im a shareholder in your company and I only own a third of the shares one of t

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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.
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.
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.
A tag along clause gives minority shareholders the right to seek a sale for themselves under the same terms with the same buyer when a majority shareholder is selling their portion of shares.
A tag along clause gives minority shareholders the right to seek a sale for themselves under the same terms with the same buyer when a majority shareholder is selling their portion of shares.
For example, a majority shareholder who holds 75% of the shares in the company who agrees to sell their shares in a share sale to a potential buyer, must offer the same price for the shares to the minority shareholders if they want to drag them along.
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.
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.
Co-sale rights are similar to tag along rights, but applies when a majority shareholder is selling only a proportion of its shares. The sale is made conditional on an offer being made to minority shareholders to sell the same proportion of their shares.
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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