Tag-along rights are provisions that protect minority shareholders by allowing them to sell their shares under the same terms as a major shareholder if that shareholder decides to sell. This ensures that smaller shareholders can exit on equal terms in a sale event.
Why are tag-along rights important for minority shareholders?
Tag-along rights prevent minority shareholders from being left behind in a sale, giving them the option to sell their shares on equal terms with a major shareholder. This protects their interests in exit scenarios.
How do tag-along rights impact startup founders?
For founders, granting tag-along rights can help attract investors by offering additional security. However, these rights may complicate sales by requiring coordination among multiple shareholders.
When are tag-along rights typically included?
Tag-along rights are often included in shareholder agreements during early investment rounds, providing reassurance to smaller investors in case of a future sale by larger stakeholders.
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