What are ‘drag along’ rights?

‘Drag Along’ rights are provisions in a company’s articles of association or in a shareholders agreement which can be used to force minority shareholders to accept an offer from someone who wants to buy the whole company.

As a third party purchaser is unlikely to want to buy anything less than 100% of  private company, the wishes of the majority to sell their shares could be thwarted if one or two minor shareholders refused to accept. Drag along rights usually work on the basis that if a specified majority of the shareholders want to accept, and the purchaser is offering the same terms to all shareholders, dissenting shareholders can be forced to accept as well.

See also ‘Tag Along rights‘.

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