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Drag-along right (DAR) is a legal concept in corporate law. Under the concept, if the majority shareholder(s) of an entity sells their stake, the prospective owner(s) have the right to force the remaining minority shareholders to join the deal. However, the owner must usually offer the same terms and conditions to the minority shareholders as to the majority shareholder(s). Drag-along rights are fairly standard terms in a stock purchase agreement. This right protects majority shareholders (allowing them to sell to an owner desiring total control of the entity, without being encumbered by holdout investors) but also protects minority shareholders (who can sell their investment on the same terms and conditions as the majority shareholder). This differs from a
tag-along right Tag along rights comprise a group of clauses in a contract A contract is a legally binding agreement that defines and governs the rights and duties between or among its parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder ...
, which also allows minority shareholders to sell on the same terms and conditions (and requires the new owner to offer them), but does not require them to sell. In most jurisdictions drag-along and tag-along rights are not statutory rights and will need to be included in the shareholders agreement or articles of association of the company. The provisions will typically specify the percentage of shareholders required for triggering the drag-along right. Drag-along rights typically terminate upon an
initial public offering An initial public offering (IPO) or stock launch is a public offering A public offering is the offering of securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal defi ...
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See also

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Pre-emption rightA pre-emption right, right of pre-emption, or first option to buy is a contractual right to acquire certain property newly coming into existence before it can be offered to any other person or entity. It comes from the Latin verb ''emo, emere, emi, e ...
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Right of first refusal Right of first refusal (ROFR or RFR) is a contractual right A concession or concession agreement is a grant of rights, land or property by a government, local authority, corporation, individual or other legal entity. Public services such as ...
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Tag-along right Tag along rights comprise a group of clauses in a contract A contract is a legally binding agreement that defines and governs the rights and duties between or among its parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder ...
, the converse concept


References


External links


Drag-along rightsThe Dark Side of Drag-Along/Tag-Along Rights
{{Corporate finance and investment banking Corporate law