Shareholders’ Agreement – Transfer of shares: Tag Along
We have been posting on the use of shareholders’ agreements and matters that can be addressed in those agreements. This post will discuss tag along rights and how they can restrict an ability of a shareholder to transfer of shares in the corporation.
A tag along, or piggyback right, is triggered when a shareholder wants to sell their shares to a third party. The selling shareholder typically notifies other shareholders of their desire to sell their shares, and if a tag along right is exercised, the third party purchaser must also purchase the other participants’ shares (they get to “tag along” for the deal) on the same terms and conditions as they originally offered the selling shareholder.
Basically, a tag along is like saying – “If you are leaving, I’m going with you!”
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