A type of shareholding rights whereby a minority shareholder is protected when a majority shareholder sells his/its stake. The minority shareholder has the right to join the transaction (hence, the minority shareholder tags along or is tagged-along) and sell his/its minority stake in the company. From a different angle, a tag-along right is the right of a shareholder to require a would-be purchaser of another shareholder’s shares to buy his/its shares on the same terms and conditions.
Tag-along rights, usually in the context of mergers and acquisitions (M&As), give old shareholders the right (but not the obligation) to participate in the a sale of their original stock arranged by the new investors (acquiring company).
In the context of venture capital, tag-along rights give one joint venturer the right to tag along when the other venturer’s interest is being sold to a third party. As such, the former venturer (the minority joint venturer) will have its own interest sold or tagged along in the same transaction. Minority joint venture partners often seek tag-along rights where the majority shareholder has a drag-along right (whereby it compels its partner to sell its own interest to the same purchaser).
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