Tag along regeling

A tag-along provision, also referred to as a tag-along right or co-sale right, protects minority shareholders against the risk of being left holding a less attractive shareholding following a sale by the majority shareholder. The provision requires the selling shareholder to afford the minority shareholders the opportunity to offer their shares to the purchaser on the same terms and conditions.

This provision is relevant in companies with multiple shareholders, as it enhances the negotiating position of minority interests and increases the attractiveness of a complete acquisition. In practice, tag-along provisions are commonly included in shareholders’ agreements relating to joint ventures, family-owned businesses and private equity investments.

The provision prevents a purchaser from acquiring only a majority interest and instead requires an acquisition of the entire share capital, thereby providing clarity to both sellers and purchasers as to the structure of the transaction.