Assures that if the majority shareholder sells his stake, minority holders are forced to join the sale transaction. This right protects majority shareholders. A Drag-Along right gives the investing shareholder the right to force the other Investor(s) to exit, or sell stakes, should the investing shareholder exit, once again, usually on the same price and terms. Drag-Along rights are standard terms in a stock purchase agreement. Drag-Along rights terminate upon an initial public offering or sale of the Issuer. See “Private Equity Term Sheet: Typical Terms and Conditions” for other relevant terms. Pertains only to equity investments.

« Back to Glossary Index