A Co-Sale/Tag-Along provision is a clause that can be included in a shareholder agreement or a stock purchase agreement that gives minority shareholders the right to join in a sale of shares of the company to a third party.
The Co-Sale provision allows minority shareholders to sell their shares alongside the majority shareholder in the event of a sale of the company, while the Tag-Along provision ensures that the minority shareholder’s shares are sold under the same terms and conditions as the majority shareholder’s shares. This means that the minority shareholder can “tag along” with the majority shareholder and receive the same price per share as the majority shareholder.
These provisions are typically designed to protect minority shareholders’ interests and provide them with an opportunity to participate in the sale of the company if they so choose. They can also be used to prevent a third party from acquiring a controlling interest in the company without offering to buy out minority shareholders.
