Drag-Along Right
Updated 2026-08-15
INTRODUCTION
English translation pending.
CORE DEFINITION
A drag-along right is a clause in shareholder or investment agreements that allows a defined majority, usually above a stated ownership threshold, to compel minority holders to join a sale at the same price and terms. Its purpose is to prevent a single small holder from blocking an acquisition the rest have approved. It is normally paired with tag-along rights, which let minorities join a sale the majority initiates. The qualification is that the right is legitimate only if the process is fair: the trigger threshold, valuation method, and representations must be specified, since the majority effectively sets the price at which others must sell.
SCAFFOLDING EFFECT
Reduce cognitive load
- Fix the trigger: define the ownership threshold and approvals required to activate the right. - Equalize terms: require that dragged holders receive the same price and protections as the majority. - Pair with tag-along: give minorities the right to join any sale the majority arranges.
Anchor fast decisions
Acquirers usually want full ownership, so a single holdout can kill a deal or extract a private premium. Concentrating the decision in a supermajority removes that veto and makes the company saleable as a unit, which raises its value for everyone. The same concentration creates the hazard: whoever controls the trigger also controls the price at which others must transact. Specifying thresholds, valuation methods, and equal terms converts the power into a procedure, so it is exercised as a routine step rather than at will.
MINIMUM ACTION
In progress 0/1Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Drag-along_rightverified
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