Drag Along, Tag Along Clause for Shareholder Agreement

This drag along, tag along clause can be inserted into a shareholder agreement to govern how the sale of shares from a shareholder to an arm's length third party must be conducted.

• The share purchase agreement must include an offer by the buyer to purchase a pro rata share of the other shareholders' shares on the same terms and at the same time.
• The terms apply to arm's length transactions only. The clause contains a definition of which parties are not considered arm's length.

A Drag Along, Tag Along Clause is an exit strategy that protects the rights of minority shareholders while at the same time giving majority shareholders a means to force other investors to exit at the same time.