Drag Along Rights

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Home Startup Terms Glossary Drag Along Rights

What is Drag Along Rights?

Drag along rights give a startup’s majority shareholders the authority to force out minority shareholders. They achieve this objective by requiring them to sell their startup shares. The drag along rights afforded are usually specified in a specific provision when purchasing equity and typically require a single or double trigger event to occur.

Drag Along Rights Examples

Examples of drag along rights triggers include:

  • Example 1. Switching from preferred to common stock
  • Example 2. Transactions involving more than 50 percent voting power
  • Example 3. Startup consolidations
  • Example 4. Mergers and acquisitions
  • Example 5. Sale or transfer of a major company asset

Learn about drag along rights on this page .

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