Tag-Along Rights

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.

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.

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.

A provision in a loan agreement that triggers a default under the agreement if the borrower defaults on any other debt obligation, even if the borrower is current on the loan containing the cross-default clause. Cross-default clauses protect lenders by ensuring they are immediately informed and can take action when a borrower's creditworthiness deteriorates, preventing other creditors from gaining preferential treatment.

A formal written assessment, typically prepared by an independent investment bank or valuation firm, evaluating whether the financial terms of a proposed transaction are fair to a company's shareholders from a financial point of view. Fairness opinions are standard practice in M&A transactions and are relied upon by boards of directors to discharge their fiduciary duties.

A contractual provision in acquisition agreements that allows the buyer to withdraw from or renegotiate a transaction if the target company experiences a significant negative event between signing and closing. MAC clauses define what constitutes a material change and typically exclude general market downturns, industry-wide conditions, and changes in law, focusing instead on company-specific deterioration.

A contractual feature that gives an investor the right to share in additional value creation beyond a base return, commonly found in preferred equity and mezzanine instruments. Upside participation structures are designed to reward investors for the risk associated with backing intangible-driven growth, aligning their interests with the company's long-term value creation.

Equity Strategy for Founders: Preserving Value Through Growth

Every funding round dilutes the founder. The question is whether that dilution is justified by the value created. Founders who understand their intangible asset base negotiate from evidence, not hope — and preserve significantly more equity through growth stages.

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.

What is a pro-rata right?

A pro-rata (or pro-rata participation) right entitles an investor to maintain their ownership percentage by participating in future funding rounds on the same terms as new investors.