What is the difference between drag along and tag along rights?

Tag-Along Rights FAQs

Tag-along or co-sale rights are essentially the opposite of drag-along rights. Whereas tag-along rights give minority shareholders negotiating rights in the event of a sale, drag-along rights force the minority shareholders to accept whatever deal is negotiated by majority shareholders.

What do drag along rights mean?

A drag-along right is a provision or clause in an agreement that enables a majority shareholder to force a minority shareholder to join in the sale of a company.

Can you have both drag-along and tag-along rights?

While the decision to drag or tag can vary from company to company, some basic principles apply to both types of rights. For example, co-owners generally need to give notice before dragging or tagging. If a majority owner doesn't give notice of the sale to his co-owners, then his dragging or tagging attempt could fail.

Who benefits from drag along rights?

In the event of a sale of a controlling interest by the shareholder(s) holding a specified majority of shares, a drag-along right enables the selling majority shareholder to procure an exit by forcing the remaining minority shareholders to similarly sell their shares to a bona fide third party purchaser on broadly the ...

Are drag along rights enforceable?

Drag-along rights are enforceable if the drag-along provision is drafted properly and contained within a valid and enforceable contract, and if the transaction is executed according to the terms of the provision.

Tag-Along and Drag-Along Rights

WHAT ARE LLC drag along rights?

A standard clause in many LLC agreements, a drag-along provision gives a majority member wanting to sell to an unrelated third party all or a substantial percentage of its membership interests in the company the right to force the other members to also sell all or a portion of their membership interests to the third ...

How do tag along rights work?

Tag along clauses are often sought by investors, so that a key shareholder (such as a founder) can't sell its shares unless it finds a buyer willing to buy shares from all shareholders with tag along rights. Often, that means finding a buyer willing to buy the entire company.

Can a minority shareholder have drag along rights?

Tag along rights are also known as 'co-sale rights' are simply those rights which mostly benefit the minority shareholders. When the promoters or Majority shareholders transfer their shares to incoming investors, the existing minority shareholders can tag along.

Are drag along rights standard?

However, the owner must usually offer the same terms and conditions to the minority shareholders as to the majority shareholder(s). Drag-along rights are fairly standard terms in a stock purchase agreement.

What does tag along mean?

: to follow another's lead especially in going from one place to another.

What is the difference between rofo and Rofr?

Most of us are familiar with the right of first refusal (“ROFR”) but not with the right of first offer (“ROFO”). Generally, a ROFR is advantageous to the purchaser and the ROFO is advantageous to the seller.

What is a tag along sale?

Tag along rights comprise a group of clauses in a contract which together have the effect of allowing the minority shareholder(s) in a corporation to also take part in a sale of shares by the majority shareholder to a third party under the same terms and conditions.

How do you enforce drag along rights?

The first remedy that majority owners can take is to request minority owners to grant an irrevocable proxy. If given, this allows majority owners to act on behalf of minority owners in any vote or action required to effect the sale. It includes signing documents on behalf of the minority owners.

Can a minority shareholder sell their shares?

Minority shareholders can still sell their stock in the future to make a profit if the investment is healthy, and can still reap the dividends that the business awards. These benefits do not go away because of the status of the shareholder.

What is a drag along price?

What is a Drag Along Provision? A drag along provision allows the majority shareholder(s) to require the minority shareholder(s) to sell their shares. This is usually triggered in a takeover offer. For example, a bidder would like to buy the entire company.

What's another word for tag along?

Similar words for tag along:

accompany (verb) connect (verb) follow (verb) lag behind, follow (verb)

How do you use tag along?

Can an LLC buyout a member?

Most LLC operating agreements contain a “buyout” provision allowing the LLC or its remaining members to buy the membership interest of a departing member. Buyout provisions can be structured however the LLC members see fit. Freedom of contract is one of the most attractive traits of an LLC.

What is pro rata right?

A pro rata right is a right that is given to an investor that allows them to maintain their initial level of ownership percentage during later financing rounds.

What does ROFR mean in real estate?

People often talk about giving or getting a Right of First Refusal ("ROFR") in real estate transactions.

Is a ROFR an option?

In effect, a ROFR is a type of option that is contingent upon the landowner receiving a third party offer.

What does ROFR mean in acting?

First right of refusal is a term that is used to 'hold' the status of a model or actor for a job. This is between the talent, the agency, and the client. If your agency has successfully booked you on a job that you have agreed to, this means that the client has selected you for the booking!

Is tag along negative?

To "tag along" is to join in. It can be used both in a positive or negative context.

Is tagalong a real word?

tagalong noun [C] (EXTRA PERSON)

someone who goes somewhere or does something with another person or other people, especially when he or she has not been invited: I was only meant to be a tagalong when my wife and her friends went skiing.

Is tagalong a word?

a person or thing that follows the lead or initiative of another.