Tag-along or drag-along? Who controls your exit?

Tag-along or drag-along? Most shareholders have no idea what these mean until it's too late.

When a majority shareholder wants to sell, minority shareholders can get left behind, stuck with new owners they never chose, or forced to sell at terrible terms.

Tag-along rights protect minority shareholders by letting them sell on the same terms as the majority shareholder (when they decide to sell). Think of it as "if you're leaving, I'm coming with you."

Drag-along rights do the opposite. They let majority shareholders force everyone to drag everyone else along with them when they find a buyer. This makes deals cleaner for acquirers who want 100% control, by helping avoid the mess caused minority shareholder holdouts.

Both clauses are critical in shareholder agreements, but they're often overlooked or poorly negotiated (or worse, poorly drafted). The time to think about exit scenarios isn't when someone's knocking on the door with an offer… It's when you're setting up the company.

If your shareholder agreement doesn't clearly address these situations, you're gambling with your ownership rights.

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About Outsiders Law

At Outsiders Law, we help business partners navigate the complex realities of growth, transition, and change with practical, plain-language legal solutions. If you’d like to learn more about shareholder agreements or have your existing one reviewed, contact us for a consultation.