Legal Q&A · Company & shareholders

An investor wants drag-along and tag-along rights in the agreement. What do they mean?

Law as at 1 August 2026

Short answer

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.

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.

More legal questions

All questions and answers
  1. Do I pay income tax when transferring or selling a business share in an s.r.o.? For an individual selling a business share, the difference between proceeds and acquisition cost or contribution is taxed as other income under Section 8 of the Income Tax Act. For shares acquired from 1 January 2004, the holding period alone generally does not confer an exemption; older shares are assessed under transitional Section 52(21). The standard exemption up to €500 and any historical limit must be checked against the date and method of acquisition. A legal entity has an exemption under Section 13c after holding at least 10% for 24 months. A gratuitous transfer is generally outside the recipient's income tax, and a business share transfer is not subject to VAT.
  2. How do I transfer a business share in an s.r.o. to another person? A business share is transferred by written transfer agreement. From 17 August 2026, the agreement must be a notarial deed or authorised by a lawyer; officially certified signatures were sufficient before then. Transfer to another shareholder normally requires general meeting consent. Transfer to someone outside the company is possible only if the memorandum of association permits it. Enforcement against either transferor or acquirer blocks the transfer. It takes effect against the company when the agreement is delivered to it.
  3. Must I pay tax on income from selling a business share in an s.r.o.? Generally, yes. An individual’s income from transferring a share in an s.r.o. or limited partnership, or cooperative membership rights, is other income under Section 8(1)(f) of the Income Tax Act. Tax applies to the difference between income and expenses, with the capital contribution or acquisition cost treated as an expense. A loss cannot be claimed, and the exemption is limited.
  4. Is an s.r.o. shareholder entitled to a share of the remaining liquidation proceeds? Yes. When a company is dissolved with liquidation, each shareholder is entitled to a share of the assets remaining after liquidation. Distribution takes place only after all creditors have been satisfied; shareholders come last. By default, the share follows the ratio of the shareholder’s paid contribution to all paid contributions, unless the memorandum specifies another method.

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Mgr. Patrik Tulinský, LL.M. Czech and Slovak attorney · SAK 300422 · ČAK 19654

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