Drag-Along Rights

A clause that allows majority shareholders to force minority shareholders to join in the sale of a company under the same terms, preventing a small group of shareholders from blocking an acquisition.

Drag-along rights make a company more acquirable by ensuring that a buyer can purchase 100% of shares without needing unanimous shareholder approval. Without them, a single minority shareholder can block a sale that every other shareholder wants to proceed.

A founder owns 70% of her company and has agreed a sale. The drag-along rights in her shareholder agreement mean she can require the three minority shareholders holding a combined 30% to sell their shares on the same terms, ensuring the acquirer receives 100% ownership and the deal can close.