Drag-Along Rights
Also called: Drag Along · Bring-Along Rights
Drag-along rights allow a defined majority of shareholders who agree to sell the company to compel remaining minority shareholders to join the sale on the same terms. They exist to stop a small holder blocking an exit the majority supports.
In more detail
Buyers frequently want 100% of a company rather than a majority stake with minority holders attached. Without drag-along rights, a single small shareholder can obstruct or extract disproportionate value from an otherwise agreed transaction.
The protection for minority holders is in the conditions: the threshold required to trigger the drag, the requirement that all shareholders receive the same price and terms, and any minimum valuation floor below which the drag cannot be used.
Drag-along is the mirror image of tag-along rights, which protect minorities by letting them join a sale the majority has negotiated rather than being left behind as shareholders under new control.
What our lawyers check
- The percentage threshold required to trigger the drag
- Whether dragged shareholders are guaranteed identical price and terms
- Any minimum valuation floor or other conditions on exercise
- Whether corresponding tag-along protection exists for minority holders
Contracts where this clause matters
Related terms
This definition is general information about commercial contracting practice, not legal advice. How a clause operates depends on the specific wording of your agreement and the law that governs it. For advice on your contract, have it reviewed by a lawyer.
All glossary terms