Fundraising & Equity
Drag-Along & Tag-Along Rights
Collated by Harry Prabandham
Curated by Rubric Financial
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What Drag-Along Rights Do
- Drag-along rights allow majority shareholders (typically requiring 50-67% approval) to force all other shareholders to participate in a sale of the company on the same terms
- Without drag-along, a minority shareholder could block an acquisition by refusing to sell — making the company unsellable even if the vast majority of shareholders approve
- Drag-along is essential for clean exits: acquirers want 100% of the company, and holdout shareholders create deal risk and legal complications
- The threshold for triggering drag-along (what percentage must approve) is a key negotiation point — founders want a higher bar, investors want a lower one
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