Startup Terms Glossary
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 .
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
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