Tag-Along Rights
The right of minority shareholders to join a sale initiated by a major shareholder, on the same terms.
Tag-along (or co-sale) rights protect minority shareholders — often founders or early employees selling personal shares — by letting other shareholders join that sale on the same price and terms, rather than being left behind while a large holder cashes out. They're most relevant in secondary sales, where a founder or major investor sells existing shares to a new buyer rather than the company issuing new stock.
In practice, tag-along rights are frequently paired with a right of first refusal: before a shareholder can sell to an outside buyer, the company and other investors typically get the first opportunity to buy those shares themselves, and only after declining does the tag-along right for outside buyers become relevant.
Tag-along rights matter most in secondary sales — when founders or early investors sell personal shares before a full exit. Without them, a founder could sell a large personal stake at an attractive price while other holders get no liquidity. For founders planning any personal liquidity, they're a real constraint to check early, because investors can join or reshape a sale you assumed was yours alone.
In the standard venture document set, co-sale usually lives in the same agreement as the right of first refusal and comes second: it only matters once the ROFR holders have passed on buying.
Co-sale agreements commonly carve out permitted transfers — gifts to family trusts, transfers to affiliates, estate planning — and sometimes small transfers below a threshold. Holders can decline to participate or waive in writing, but closing a covered sale while ignoring valid elections is a breach.
Hypothetically, a founder who owns 30% of a startup agrees to sell 10% of the company to a growth fund at $5 per share. An early investor with co-sale rights elects to tag along and sells a proportional slice of its own shares to the same buyer at the same $5 and terms, so the founder's sale shrinks accordingly unless the buyer takes more. The founder can't complete a side deal at a premium while the investor stays locked in.
If you're a founder planning any personal secondary sale, check your tag-along and ROFR provisions early — investors can have real leverage to slow, block, or piggyback on that sale, and surprises here can derail a liquidity event you were counting on.
How is tag-along different from drag-along?
Tag-along protects minority holders by letting them join a sale someone else initiated; drag-along protects a majority by forcing minority holders to join a sale the majority approved — they solve opposite problems.
When do tag-along rights actually get used?
Mostly in secondary sales by founders or early investors before an acquisition or IPO. In a full company sale, drag-along provisions usually put everyone into the same deal anyway.
Do tag-along rights apply to every share transfer?
No. Agreements typically carve out permitted transfers like gifts to family trusts and transfers to affiliates, and sometimes exempt small transfers.
Can tag-along rights be waived?
Yes — a holder can decline to participate or waive in writing. What a seller can't do is ignore valid elections and close anyway.
Related terms
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