Drag Along and Tag Along

These rights constitute a protection mechanism for shareholders. If you are about to start a business or are in the capital raising phase, get to know them! They're sure to get you out of a hurry.

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DRAG ALONG

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Also known as the “right of drag”, it constitutes a mechanism for protecting the rights of majority shareholders.

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It allows shareholders and/or minority shareholders to dispose of their shareholding in the company, when the purpose of the purchasers is to acquire all of the outstanding shares in order to have total control of the company.

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TAG ALONG

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The “right of accompaniment” is that mechanism that aims to protect the interests of shareholders and/or minority shareholders by granting the right to dispose of their participation, when a partner and/or majority shareholder decides to dispose of their shareholding.

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In other words, it allows the partner and/or minority shareholder to join the transaction under the same conditions as the majority shareholder who sells.

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Of course, in order to exercise them, they must be agreed in statutes and meet different conditions in order to apply them:

1. Agree on the minimum sales price
2. Mechanism for valuation of shares
3. For the case of Tag Along:

1. Notify shareholders of the existence of a buyer
2. Trading and buying conditions
3. Deadline for the operation
4. Disposal conditions

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Drag Along And Tag Along it will not always be necessary to include them in the statutes, it will depend on the details of the shareholders and potential investors.

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Remember that what matters most to an investor, is to take care of your investment. 

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Do you have any doubts left? At RMG ABOGADOS we specialize in corporate law and we can be happy to support you, send an email to l.manzano@rmgsc.com