Drag-Along Rights

Drag-Along Rights (Equity) – Assures that if the majority shareholder sells his stake, minority holders are forced to join the transaction. This right protects majority shareholders.  A Drag-Along right gives the investing shareholder the right to force the other investor(s) to exit should the investing shareholder exit, and usually on the same price and terms. Drag-along rights are fairly standard terms within a stock purchase agreement. Drag-along rights typically terminate upon an initial public offering.