This Drag Along Clause is for use in shareholder agreements where there are minority and majority shareholders.
A “Drag Along” right protects the interests of majority shareholders (i.e. the value of their shareholding) by providing that any third party who has agreed to purchase the majority shareholder’s shares is also able to purchase any minority shareholding in the company. The majority shareholder is able to literally drag along the minority shareholder in his sale of shares.
This prevents majority shareholders from being caught in the situation where a lucrative opportunity is missed due to the potential purchaser’s insistence on acquiring 100% of the shares and the minority shareholder’s refusal to sell his shares.
This Drag Along Clause is already included in the Shareholders’ Agreements “Shareholders’ Agreement - Long - New Share Issue - Majority Shareholder Bias” and “Shareholders’ Agreement - Long - No Share Issue - Majority Shareholder Bias.”
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