Drag along rights (optional clause)

Drag along rights (optional clause)

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This document is a drag along rights clause to be added to a shareholders’ agreement.

Under a drag along rights clause, a number of majority shareholders can require the minority shareholders to join in the sale of the shares in the company, usually on the same terms and conditions.

This clause makes it easier for a company to sell its business by way of a share sale and not be hampered by minority shareholders making unreasonable demands. However, the minority shareholders are entitled to the sale of their shares being on the same terms as that of the majority shareholders.

Using this precedent

This is a general clause which can be inserted into a shareholders’ agreement.  

When inserting this optional clause into an agreement, care must be taken to ensure that the agreement remains consistent. Cross-references, definitions and schedules should all be checked

This document has been authored for Lexis Nexis by Elise Margow, Principal, Legally Speaking.

This document is prepared with the assistance of Specialist Editor Stephen Newman, Executive Counsel, Ponte Earle.