Tag-along right

A tag-along right (droit de sortie conjointe) is a contractual right in a shareholders' agreement allowing minority shareholders to sell their shares alongside a majority shareholder's disposal, at the same price and on the same terms. It protects minority investors from being stranded in a company after the majority shareholder exits — particularly relevant when the new majority owner may be less accommodating. Unlike the drag-along (which forces minorities to sell), the tag-along is an option — the minority exercises it only if they wish to exit alongside the majority.

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Example: a PE fund sells its 65% stake in a Swiss SME for CHF 26.0 million (CHF 40 per share) to a strategic buyer. The minority shareholders (35% combined) hold tag-along rights — they may sell their shares at the same CHF 40 per share price to the same buyer. Two minority shareholders exercise their tag-along, selling CHF 14.0 million of shares alongside the fund. The buyer must now acquire 100% of the company rather than the initially contemplated 65%.

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Hectelion structures tag-along rights in shareholders' agreements to ensure minority investors have effective exit options in fundraising and M&A transactions.