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I'd add a couple here that we were made aware of on my Weil scheme:


Drag-along rights

A drag-along right is a provision that enables a majority shareholder to force a minority shareholder to join in the sale of a company. The majority owner doing the dragging must give the minority shareholder the same price, terms, and conditions as any other seller. Drag-along rights are designed to protect the majority shareholder.


Key Takeaways:

  • Drag-along rights are in place during investment negotiations between a company's majority shareholders and minority shareholders.
  • Drag-along rights help eliminate minority owners and sell 100% of a company's securities to a potential buyer.
  • Although this provision protects majority shareholders from blocked sales, minority shareholders can realize favourable sales terms that may not otherwise be available.

Tag-along rights

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. Tag-alongs effectively oblige the majority shareholder to include the holdings of the minority holder in the negotiations so that the tag-along right is exercised.


Key Takeaways:

  • Tag-along rights are contractual obligations to protect a minority investor in a startup or company.
  • Tag-along rights are mainly used to ensure that the stake of minority stakeholders is considered during a company sale.
  • They ensure greater liquidity for minority shareholders.
  • The minority investors are entitled to the same price and conditions as the majority investor when the shares are sold.

(Source: Investopedia)


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