Legal & Compliance
Tag-Along Rights
Last updated
Quick Answer
Rights allowing minority shareholders to join a sale when majority shareholders sell their shares, ensuring equal treatment in a transaction.
Tag-along rights (or co-sale rights) give minority shareholders the right to participate in a sale of shares by majority shareholders on the same terms. If a founder or majority investor sells their shares to a third party, tag-along rights allow other shareholders to 'tag along' and sell their shares proportionally at the same price and terms. Tag-along rights protect minority investors (angels, employees) from being left behind when insiders negotiate a deal. They ensure that if majority shareholders get an attractive exit opportunity, minority shareholders get access to the same opportunity. Tag-along rights are standard in VC investment agreements and are distinct from drag-along rights (which compel minority shareholders to sell).
Related Concepts
Further Reading
VC Term Sheet Template & Guide: Every Clause Explained with Examples
A clause-by-clause breakdown of every standard VC term sheet provision — what each term means, what's market, what to negotiate, and the red flags that cost founders millions.
Drag-Along and Tag-Along Rights: A Founder's Guide
Drag-along and tag-along rights determine who controls your exit. Here's what every founder needs to know before signing a term sheet.
How to Negotiate Your Term Sheet: A Founder's Playbook
A tactical guide to negotiating your startup term sheet — which terms matter most, where to push back, and how to protect your interests without killing the deal.
Term Sheet Explained: Every Clause Founders Must Know
Term sheets are dense, jargon-heavy, and consequential. Here's a founder-friendly breakdown of every major clause and what it means for your company.
Comparisons
Frequently Asked Questions
What is Tag-Along Rights in venture capital?
Tag-along rights (or co-sale rights) give minority shareholders the right to participate in a sale of shares by majority shareholders on the same terms.
Why is Tag-Along Rights important for startups?
Understanding Tag-Along Rights is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Tag-Along Rights fall under in VC?
Tag-Along Rights falls under the legal category in venture capital. This area covers concepts related to the legal frameworks and compliance requirements in venture capital.
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