Tag-Along Rights

A provision that allows majority shareholders (or lead investors) to force minority shareholders to join in the sale of the company on the same terms. Drag-along rights prevent minority holders from blocking an exit that the majority supports.

The contractual right of existing shareholders to participate in future funding rounds on a pro-rata basis, maintaining their ownership percentage. Pre-emption rights protect early investors from dilution and are a standard provision in shareholders' agreements.

Legal entitlements to exploit subsurface resources such as oil, gas, or minerals. Mineral rights are intangible assets that can carry substantial value, require specialised valuation techniques based on reserve estimates and commodity prices, and are subject to depletion accounting rather than amortisation.

The percentage ownership interest a shareholder holds in a company. Equity stakes determine voting rights, dividend entitlements, and the share of proceeds received in a sale or liquidation event.

A group of individuals elected by shareholders to oversee company management, set strategic direction, and protect shareholder interests. Investor-backed companies typically include board seats for lead investors alongside founder and independent directors.

The reduction in existing shareholders' ownership percentage when a company issues new shares, typically during a fundraising round. Dilution is an expected part of growth financing, but founders and early investors monitor it closely to protect their economic interest.

An independent assessment, typically prepared by an investment bank or valuation firm, that evaluates whether the financial terms of a proposed transaction are fair from a financial point of view to a company's shareholders. Fairness opinions are standard practice in significant M&A transactions and require rigorous valuation of both tangible and intangible assets.

A legally binding contract between a company's shareholders that governs their rights, obligations, and the rules for key decisions including share transfers, board composition, dividend policy, and exit mechanisms. Essential governance infrastructure for investor-backed companies.

What are drag-along rights and when are they exercised?

Drag-along rights allow majority shareholders (often preferred investors) to force minority shareholders (usually founders) to sell their shares in an acquisition, preventing holdouts from blocking deals.

What is a co-sale right (tag-along right for shareholders)?

Co-sale rights allow shareholders to participate in a sale of the company on the same terms negotiated by majority shareholders, preventing discrimination against minorities.