Tag-Along Rights
Definition
A provision that gives minority shareholders (sometimes including employees) the right to join a sale initiated by majority shareholders, selling their shares on the same terms and at the same price. Tag-along rights protect minority shareholders from being left behind in a partial sale.
Real-World Example
A founder wants to sell 500,000 of their personal shares to a secondary buyer at $20/share. Your tag-along rights allow you to sell a proportional amount of your shares in the same transaction at the same $20/share price.
Common Mistake
Assuming you have tag-along rights without checking. These rights are usually granted to investors and sometimes to founders but are rarely included in standard employee stock option agreements. If you do not have them, you may be locked out of secondary sale opportunities.
Why It Matters
Tag-along rights protect you from situations where insiders get liquidity at favorable prices while you are left holding illiquid shares. They are rare for employees but extremely valuable if included.
Related Terms
Want to learn one equity concept per week?
Read the Newsletter