Tag-Along Clause Template (Copy, Paste & Adapt)

Tag-Along Right Clause (Sample):

If one or more shareholders holding at least [majority]% of the shares agree to sell their shares to a third party, the selling shareholders must ensure that the third party offers to purchase all remaining shares from the other shareholders on the same terms and at the same price per share

What is a Tag-Along Clause?

A tag-along clause is a contractual right for minority shareholders. If the majority sells their shares, the minority can “tag along” and sell their shares to the same buyer, on the same terms. This prevents minority shareholders from being left with a new, potentially unwelcome owner.

Who Needs It and Why?

• Best for: Minority shareholders (anyone with less than 50% of the company)

• Key risk if missing: You could be stuck with a new controlling owner, unable to sell your shares or influence company direction.

• Typical UK challenge: If not included in the shareholders’ agreement or articles, you have no automatic right to sell alongside the majority.

How It Works in Practice

Example:
You own 10% of a tech start-up. The founders (holding 80%) agree to sell to a US buyer. With a tag-along clause, you can force the buyer to purchase your 10% at the same price per share. Without it, you could be left behind, powerless and illiquid.

Common Pitfalls and Legal Nuances

• The clause must be in the shareholders’ agreement or articles to be enforceable.

• The percentage threshold for triggering tag-along can vary—check your agreement.

• Tag-along does not guarantee a sale; it only gives you the right to sell if the majority does.

FAQ

1. Does a tag-along clause force the majority to sell?
No, it only gives minority shareholders the right to sell if the majority chooses to sell.

2. Can I add a tag-along clause after a dispute starts?
It’s very difficult—these clauses should be agreed when relationships are good.

3. Is a tag-along clause automatic in UK law?
No, it must be written into your shareholders’ agreement or articles.

4. What’s the difference between tag-along and drag-along?
Tag-along protects minorities; drag-along lets the majority force a sale.

5. Can the buyer refuse to buy my shares?
If the clause is properly drafted, the majority cannot complete the sale unless the buyer offers to buy all shares.

Summary / Action Steps

• Review your shareholders’ agreement for a tag-along clause.

• If missing, negotiate its inclusion before any sale discussions.

• Use the template above as a starting point, but adapt it to your company’s needs.

Disclaimer: This content is for general information only and does not constitute legal, financial, or tax advice. Outcomes may vary depending on your individual circumstances.