Also called: Tag along, Co-sale rights
TL;DR
The right of minority shareholders to join a sale by majority shareholders on the same terms, preventing 'cherry-picking' liquidity.
Tag-along rights protect minority shareholders. If a major holder (typically a founder or large investor) sells shares, tag-along holders can require the buyer to purchase a proportional amount of their shares on the same terms.
Without tag-along, a founder could sell secondary shares at a high price while leaving employees and small investors with no liquidity. Tag-along is a standard protection in modern term sheets.
A founder negotiates a $4M secondary sale to a growth fund. The Series A investor's tag-along right lets them sell their pro rata share of the same shares at the same price, keeping founders from cashing out unilaterally.
Diligence content; not on the deck.
A provision allowing majority shareholders to force minority shareholders to participate in an approved sale of the company on the same terms.
The right of the company or existing investors to match any third-party offer to buy shares before the seller can transfer them externally.
A sale of existing shareholder stock (founders, employees, or early investors) to a new investor, providing partial liquidity before an IPO or acquisition.
A non-binding document outlining the principal terms of a proposed financing, used to align investor and founder before legal documents are drafted.
The equity class issued to investors, carrying special rights such as liquidation preference, anti-dilution protection, and protective covenants.
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