Drag-along is a right to require a share transfer: when selling the company, the majority shareholder can require the minority to sell too, so the buyer acquires the whole company. Tag-along is the corresponding minority right to join a sale on the same terms. Both have statutory rules for a simple joint-stock company and can be registered to bind legal successors. In an s.r.o., they operate only contractually.
What are drag-along and tag-along rights for?
A buyer usually wants the whole company, rather than 70% with an unknown minority attached. Equally, a minority shareholder does not want to be carried along with a new owner they did not choose. These rights address those two situations:
- Drag-along, the right to require a transfer: when selling their shares, the majority shareholder may require the minority to sell alongside them on the same terms. It protects the ability to sell the company as a whole.
- Tag-along, the right to join a transfer: when the majority sells, the minority may join the sale on the same terms. It protects the minority from being trapped in the company with a new owner.
The same family includes shoot-out, a right to require acquisition of shares used to break a shareholder deadlock.
How does the company’s legal form affect enforcement?
For a simple joint-stock company, all three arrangements have express statutory rules as ancillary provisions to a shareholders’ agreement (Section 220w of the Commercial Code). Tag-along and drag-along rights can also be registered. Registered rights are not subject to limitation and bind a shareholder’s legal successors, rather than only those who signed the agreement. If a registered tag-along right is breached, its holder may demand that their shares be bought directly by the third-party purchaser or by the obligated shareholder (Section 220x).
In an s.r.o., and generally for unregistered arrangements, drag-along and tag-along operate only as obligations between the contracting parties. They are not toothless, but their strength must be built contractually through options, contractual penalties and coordination with the memorandum of association. We explain this in our shareholders’ agreements service.
What to watch for when negotiating with an investor
The words “drag-along” in a term sheet are not enough. The parameters matter: the shareholding threshold that activates the right, any minimum price, how “the same terms” are defined, and the consequences of breach. A poorly structured drag-along can force a minority founder out at a price they cannot influence. We review these terms with you through our investor entry service before you sign anything.
This answer provides general information on the law as at 1 August 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
