Tag-Along Rights

What are Tag-Along Rights?

Tag-along rights (also called co-sale rights) allow minority shareholders to participate in a sale when majority shareholders sell their shares. If a founder sells to a buyer, other shareholders can "tag along" and sell proportionally on the same terms.

Why Tag-Along Matters

Tag-along protects minority shareholders from being left behind in a company with new controlling owners they did not choose. It ensures everyone gets the same opportunity to exit.

For investors, tag-along prevents founders from selling their shares to a strategic buyer while leaving investors stuck in an illiquid position with new owners they have no relationship with.

How Tag-Along Works

If a founder negotiates to sell 50% of their shares, investors can require the buyer to purchase the same percentage of their shares on identical terms. The buyer must accommodate this or the deal cannot proceed.

Your SaaS company founder wants to sell half their shares:

• Founder owns: 60% (wants to sell 30% to secondary buyer)
• Investor owns: 25% with tag-along rights

With tag-along, investor can require the buyer to also purchase 50% of their stake (12.5%) on the same terms. The buyer must buy 42.5% total or the founder cannot complete their sale.