Tag-Along / Drag-Along
Shareholder rights governing what happens when a majority shareholder sells: tag-along lets minorities join the sale; drag-along forces them to.
Also known as: Tag-along rights, Drag-along rights, Co-sale rights
Tag-along (co-sale right)
If a majority shareholder sells, minority shareholders have the right to join the sale on the same terms — protecting them from being left behind with a new unknown majority owner.
Drag-along
If a majority shareholder wants to sell 100% of the business, they can force minorities to sell on the same terms — enabling clean M&A exits without holdout problems.
TS relevance
Both provisions appear in shareholders' agreements reviewed during FDD; they affect the mechanics of exit and the equity waterfall.
Related terms
SPA (Share Purchase Agreement)
The definitive legal agreement governing the sale and purchase of shares in a company, including price, conditions precedent, representations, warranties, and indemnities.
Preference Shares
Shares that rank ahead of ordinary shares for dividends and/or proceeds in a liquidation or exit, often used in PE structures to return capital to the fund before management.
Good Leaver / Bad Leaver
Provisions in a management equity plan determining the price at which a departing manager's shares are bought back, depending on the reason for departure.