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Drag along and Tag along rights are common provisions in Private equity (PE)/Venture capital (VC) and corporate joint venture (JV) transaction documentation.

In the event of a sale of a controlling interest by a PE/VC fund investor or by a shareholder in a corporate JV which holds a specified majority of shares, a drag along right (sometimes referred to as a come along right) enables the selling majority shareholder to procure an exit by forcing the remaining minority shareholders to also sell their shares to a bona fide third party purchaser on broadly the same terms.

Where a majority shareholder wishes to sell its shares, a tag along right (sometimes referred to as a piggy back right) enables the minority shareholders to exit from the PE/VC fund or the JV by obliging the selling majority shareholder to procure that the third party purchaser extends its offer to include the shares of the minority shareholders on broadly the same terms. 

Drag along rights therefore favour the majority shareholder, while tag along rights are more advantageous for minority shareholders.

Set out below are