This is an article about the conditions that you should include in your shareholders` pact. Other similar articles concern rights, the right of pre-emption and pre-emption rights. Even if they have majority control, minority shareholders can still, rightly, delay or thwart plans to change the company`s management. Therefore, most commercial buyers want complete control – ownership of all equity. For a large institutional investor, it is essential that, if he is to be able to sell to a commercial buyer, there is a delay that forces the minority to sell simultaneously to the buyer. It is very common for those who are towed not to be subject to insurance, guarantees and alliances that can go beyond the property and sell. The Tag Along clauses are intended to protect minority shareholders from abandonment when a majority shareholder decides to sell its shares. If a minority shareholder owns 10% of a company, it would be difficult to sell because most buyers want 100% of a business. This may force minority shareholders to sell their shares at a much lower price or to do nothing about the true value of the company.
Without a day along the rights, minority shareholders may find that they hold unvalued or devalued shares. A “Drag Along” clause in the shareholder agreement allows a certain portion of the company`s shareholders to impose the sale of the company if they approve the terms of the third party`s offer. Typically, the charge is only triggered if a significant percentage of shareholders accept the transaction (for example. B shareholders representing 75% of the outstanding shares). When a drag-along clause is invoked, it provides that holdouts can be “trained” and forced to sell their shares. A drag-along clause may prevent minority shareholders from terminating the sale of the business in which the buyer wants the entire business, not just a substantial part of it. Often in the case of a merger, even if the accepting company is listed on the stock exchange, there may be a limit to the speed with which shares are used to finance the purchase are sold.