drag-along

Definition

Rights allowing majority shareholders to force minority shareholders to join in selling the company. Corporate democracy's escape hatch, where your vote doesn't matter if enough people with more shares decide differently.

Example Usage

When the board approved the acquisition, drag-along rights forced all shareholders to sell, including the founder who'd voted against it.

Origin

Corporate law terminology adopted into venture capital term sheets by the 1980s

Fun Fact

Drag-along rights exist because without them, tiny shareholders could hold acquisitions hostage, though it does mean founders can be forced to sell their companies against their wishes.

Source: Corporate governance and venture capital terminology

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