Tag-along rights allow minority shareholders to tag along when a large holder sells, receiving the same price and terms pro rata.

How it works

If a founder sells 30% to a buyer, a 10% preferred holder with tag rights can include up to 10% of the company in the transaction—preventing insiders from cashing out at a premium while minorities stay illiquid. ROFR may run before tag; notice periods and minimum sale sizes are negotiated.

Standard in US investors’ rights agreements and UK SHAs.

Why it matters

• Founders: Plan cap table sales knowing investors may exercise tag and enlarge the sale.
• Investors: Tag protects against asymmetric liquidity between insiders and funds.

Common mistake

Assuming tag applies to any primary round. It typically triggers on secondary sales by major holders, not new issuances.

Related ideas

Drag-along, ROFR, co-sale, and secondary sale.

When you will see it

Tag-along rights protect minority investors when founders sell secondary shares to a buyer who wants control without buying the whole company.

Questions to ask

• What minimum sale size triggers tag rights?
• Do tag holders get the same price and terms as the selling major?
• Does ROFR run before tag can be exercised?

Practical takeaway

Treat tag-along rights as something to define precisely in writing—not assume everyone in the room shares the same meaning. In term sheets, board decks, and LP updates, tie the concept to a concrete decision: a vote, a price input, a fund policy, or a metric formula. When definitions drift, teams misprice risk, miss leverage, or waste cycles on the wrong conversation.