What are Drag-Along Rights?
Drag-along rights are contractual clauses that allow majority shareholders to force minority shareholders to sell their shares when the company is being sold.
Drag-Along Rights Meaning
The drag-along rights centre on enabling clean exits. To define drag-along rights in practice, if a majority of shareholders agree to a sale, these rights require all remaining shareholders to join the transaction on the same terms. A clear drag-along rights definition prevents minority shareholders from blocking a deal that benefits the wider shareholder group. These rights are common in shareholders’ agreements and investment documents, especially in venture-backed companies, and help ensure that acquisitions can proceed smoothly without legal deadlock.
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