The purchase of the Option or any such shares or other securities by Issuer shall be settled within 10 business days of the date of the acceptance of the offer and the purchase price shall be paid to Grantee in immediately available funds; provided that, if prior notification to or approval of any regulatory authority is required in connection with such purchase, Issuer shall promptly file the required notice or application for approval and shall expeditiously process the same (and Grantee shall xxxxxx- ate with Issuer in the filing of any such notice or application and the obtaining of any such approval) and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which, as the case may be, (a) required notification period has expired or been terminated or (b) such approval has been obtained and, in either event, any requisite waiting period shall have passed. In contrast to tag . Liability limited by a scheme approved under Professional Standards Legislation. Effectively, the majority shareholder is obliged to include the interests of the minority shareholder due to the contractual obligations, which are co-sale rights. A 'drag along' clause allows a large shareholder (or group of shareholders) to 'drag' the other shareholders into a joint sale of the entire venture. Drag along clauses are essentially a right that majority shareholders possess. A drag along clause is a provision that can be found in a shareholders agreement. Co-sale rights are exactly as the term suggests. Drag-Along and Tag-Along. A drag along clause is a provision that can be found in a shareholders agreement. Tag Along If the Management Shareholder shall propose to sell or convey in a single transaction or in a series of related transactions a number of shares of Common Stock or options or warrants to acquire Common Stock equal to or greater than 5% of the then outstanding shares of Common Stock to an Independent Third Party (other than in a sale pursuant to a registration statement in which the Holders may exercise their "piggyback" registration rights under the Registration Rights Agreement), the Management Shareholder shall provide each Holder with written notice (the "Tag-Along Notice") setting forth the terms and conditions of the proposed transfer, including the identity of the Independent Third Party, the number of shares of Common Stock to be transferred, the per share price to be paid for the shares of Common Stock to be transferred and the type and nature of the consideration to be received therefor; provided, however, notwithstanding the foregoing, the Management Shareholder shall not be required to provide any Holder with a Tag-Along Notice, and the Holders shall not be entitled to sell any Warrant Shares under this Section 15(b), if the Management Shareholder proposes to sell or convey shares of Common Stock on account of personal hardship, including, but not limited to, (i) the commencement of a voluntary or involuntary case under the United States Code entitled "Bankruptcy" by the Management Shareholder or his creditors, (ii) a sale or other transfer pursuant to a separation agreement or a final decree or judgment of divorce in favor of or against the Management Shareholder, or (iii) a serious illness of the Management Shareholder or any parent, spouse, sibling or child of the Management Shareholder. The purchase of the Option or any such shares or other securities by Issuer shall be settled within 10 business days of the date of the acceptance of the offer and the purchase price shall be paid to Grantee in immediately available funds; provided that, if prior notification to or approval of any regulatory authority is required in connection with such purchase, Issuer shall promptly file the required notice or application for approval and shall expeditiously process the same (and Grantee shall xxxxxx- ate with Issuer in the filing of any such notice or application and the obtaining of any such approval) and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which, as the case may be, (a) required notification period has expired or been terminated or (b) such approval has been obtained and, in either event, any requisite waiting period shall have passed. For example, a tech start-up CEO wants to retain more than 50% shares of the start to maintain the majority owner of the company. These rights allow the minority investor to also hop onto the negotiation train and sell their shares as well if needed. The intent of this computation is to accord to the Management Stockholder the right to sell the same percentage of its holdings of Common Stock as the Acquiring Stockholder are entitled to sell in such a transaction. A drag along clause implicitly recognises that minority shareholdings in private companies are not readily liquid. The obligation of any party to take the actions required by this section will not apply to a Liquidating Event if the other party involved in such Liquidating Event is an affiliate or stockholder of the Company holding more than 10% of the voting power of the Company. First Refusal At any time after the first occurrence of a Triggering Event and prior to the later of (a) the expiration of 18 months immediately following the first purchase of shares of Issuer Common Stock pursuant to the Option and (b) the Option Termination Date, if Grantee shall desire to sell, assign, transfer or otherwise dispose of all or any of the Option or the shares of Issuer Common Stock or other securities acquired by it pursuant to the Option, it shall give Issuer written notice of the proposed transaction (an "OFFEROR'S NOTICE"), identifying the proposed transferee, accompanied by a copy of a binding offer to purchase the Option or such shares or other securities signed by such transferee and setting forth the terms of the proposed transaction. Unlike its counterpart, it is a provision or clause in an agreement that gives the right to a majority shareholder to compel a minority shareholder to join in the sale of a company. We're Australia's fastest growing law firm and operate entirely online. When the situation arises where Tag Along rights are available, a notice of sale is sent to applicable holders. This will happen when co-sale is not present. A drag along provision allows a majority shareholder to make a minority shareholder sell their shares. Each Holder, by written notice to the Management Shareholder delivered within 10 days after the date of such Tag-Along Notice, shall be entitled to require the Management Shareholder to include in the proposed sale to the Independent Third Party in the same transaction all of their Warrant Shares (or, if the Management Shareholder is selling less than all of his Common Stock or the prospective transferee is not willing to purchase all of the shares of Common Stock and Warrant Shares proposed to be sold by the Management Shareholder and the Holders exercising their rights pursuant to this Section 15(b), then the Management Shareholder and the Holders participating in such sale shall each be entitled to sell their pro rata portion of the total number of shares of Common Stock and Warrant Shares to be purchased by the proposed transferee computed on the basis of the number of shares of Common Stock or Warrant Shares, as the case may be, proposed to be sold by the Management Shareholder or such Holder, as the case may be, on the same terms and conditions set forth in the Tag-Along Notice. Keep your Delaware LLC from sinking prematurely as a result of member business divorce. Drag Along/Tag Along Rights. However, the owner must usually offer the same terms and conditions to the minority shareholders as to the majority shareholder(s). If you would like a consultation on drag and tag along clauses, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat. Key Takeaways. Under the concept, if an entity's majority shareholder(s) sells their stake, the prospective owner(s) have the right to force the remaining minority shareholders to join the deal. The agreement dictates matters that are crucial to how the company is run, including: What happens between shareholders will ultimately impact the entire company. For example, Company ABC is listed on the exchange. The requirements of this Section 11 shall not apply to (w) any disposition as a result of which the proposed transferee would own beneficially not more than 2% of the outstanding voting power of Issuer, (x) any disposition of Issuer Common Stock or other securities by a person to whom grantee has assigned its rights under the Option with the consent of Issuer, (y) any sale by means of a public offering registered under the Securities Act in which steps are taken to reasonably assure that no purchaser will acquire securities representing more than 2% of the outstanding voting power of Issuer or (z) any transfer to a wholly owned subsidiary of Grantee which agrees in writing to be bound by the terms hereof. Delaware LLC Member Buyout Options: Shotgun, Baseball, Drag-Along, Tag-Along, Rochambeau, Coin Flip. A drag along rights clause is antonymous to a tagalong rights clause. Except for limited circumstances, (i) GPP-II may transfer its shares of Masthercell Global Preferred Stock to a third party, provided that during the first two years following closing its right to transfer is subject to our Right of First Refusal and (ii) we may transfer share capital of Masthercell Global only with the approval of the Masthercell Global board of directors (Masthercell Global Board), with at least one of the GPP-II designated Masthercell Global board directors approving the transfer, and subject to a right of first refusal initially to the benefit of Masthercell Global and thereafter to GPP-II and any other stockholder who may become a party to the Stockholders Agreement. Decisions could be affected, especially when a company is going under sale. When Would I Use Drag Along And Tag Along Clauses? Each other Stockholder shall have the right at any time within ten (10) days from the date of the Co-Sale Notice within which to deliver to Holdings and to the Company notice of its election (the Election Notice) to exercise the Right of Co-Sale and to sell to the proposed transferee named in the Co-Sale Notice (at the applicable price per share set forth in the Co-Sale Notice) the aggregate number of shares of Stock proposed to be sold to such purchaser multiplied by a fraction, the numerator of which is the number of shares actually held by such other Stockholder and the denominator of which equals the total number of shares of Stock held by all of the Stockholders of the Company. The governing agreement required the majority owner to provide advance notice of a drag sale transaction, but the majority owner did not give notice of the drag sale until after it . Drag along rights. Shareholders' Agreements Teece Hodgson & Ward. It is common when a company works in a high risk-bearing sector where results expected are high. 1. Tag-Along Rights (a) In the event that, at any time prior to the date on which the Company consummates a sale of shares of Common Stock in an initial public offering of shares of Common Stock registered pursuant to the Securities Act of 1933, as amended, the Acquiring Stockholder proposes to Transfer shares of Common Stock to a Third Party Purchaser, in a single Transfer or a series of related Transfers constituting a Company Sale (as defined in Section 3(f) below) then each Management Stockholder shall have the right, subject to Section 3(e) below (the Tag-Along Right) to require that the proposed Third Party Purchaser purchase from such Management Stockholder up to the number of whole shares of Common Stock (including any Restricted Shares issuable upon the exercise of Options that are vested as of the date of such Transfer, including any Options that vest as a result of the consummation of the Transfer to the Third Party Purchaser (collectively, the Vested Options)) equal to the number derived by multiplying (x) the total number of shares of Common Stock that the proposed Third Party Purchaser has agreed or committed to purchase, by (y) a fraction, the numerator of which is the total number of shares of Common Stock (including shares of Common Stock issuable upon exercise of Vested Options) owned by the Management Stockholder, and the denominator of which is the aggregate number of shares of Common Stock owned by all Acquiring Stockholders, the Management Stockholder and all other holders of Common Stock or Options (whether or not vested).