Tag-Along Rights
The right for minority shareholders to join a sale if majority shareholders sell their shares.
Definition
Tag-along rights (also called co-sale rights) allow minority shareholders to sell their shares alongside a majority shareholder on the same terms and conditions. If a founder or major investor sells a large block of shares, tag-along rights ensure smaller shareholders can participate proportionally. This protects minority holders from being left behind in a favorable transaction.
Why it matters
Tag-along rights protect you if a founder or major investor finds a buyer. Without them, large shareholders could sell at a premium while you are stuck holding illiquid shares. With tag-along, you can join the sale on equal terms.
Example
A founder wants to sell 1M of their 3M shares to a buyer at $15/share. Other shareholders with tag-along rights can sell proportionally. If you own 1% of the company, you can sell up to 1% of 1M = 10,000 shares at $15 each.