Drag Along Clause

This Drag Along Clause is for use in shareholders’ agreements where there are minority and majority shareholders.

How a “drag along” right operates

A “drag along” right protects the interests of majority shareholders (including the value of their shareholding) by providing that a third party who has agreed to purchase the majority shareholder’s shares is also able to purchase any minority shareholding in the company.

In effect, the majority shareholder can require the minority shareholder to sell alongside the majority shareholder’s sale of shares.

Why this clause is used in a sale scenario

This clause helps avoid a situation where a lucrative opportunity is missed because a potential purchaser insists on acquiring 100% of the shares and a minority shareholder refuses to sell.

Where this clause is already included

This Drag Along Clause is already included in the following Shareholders’ Agreements:

• Shareholders’ Agreement - Long - New Share Issue - Majority Shareholder Bias
• Shareholders’ Agreement - Long - No Share Issue - Majority Shareholder Bias

Drag Along Clause is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.