TLDR:
A Tag-Along Right (also called Co-Sale Right) is a contractual provision allowing minority shareholders to participate in any sale of shares by majority shareholders to a third party, on the same terms and pricing. Tag-along rights protect minority shareholders from being left behind in a controlling owner’s exit—either with a new controlling buyer they didn’t choose, or holding illiquid stock when the only material buyer has already paid the controlling owner.
Standard Tag-Along Mechanics
Typical tag-along process: a majority shareholder receives a bona fide offer to sell their shares; the selling shareholder must notify minority shareholders of the proposed sale terms; minority shareholders have a defined period (typically 15-30 days) to elect to participate; if minority shareholders exercise tag rights, they sell a pro-rata portion of their shares on the same terms; the buyer must accept the additional shares or the sale doesn’t close (the seller cannot exclude minority shares to consummate). Tag-along rights are typically structured pro-rata (each holder can sell up to their percentage of shares being sold) rather than co-sale at full holdings.
Tag-Along vs. Drag-Along Pairing
Tag-along and drag-along rights typically appear together in venture-backed companies, providing balanced protections: tag-along protects minority from being left behind in a partial sale; drag-along protects majority from minority blocking a complete sale. The two together enable optimal exit dynamics—minority gets ride-along protection when majority sells, but minority cannot block majority’s exit. The economic effect is to align all shareholders’ liquidity events.
Specific Drafting Considerations
Modern tag-along provisions address: defining covered transactions (typically only sales by holders above defined percentage—not all transfers), permitted exclusions (transfers to family members, affiliates, estate planning), warranty allocation when minority joins sale (typically minimal individual warranties beyond authority and ownership), allocation of expenses (proportional or seller-pays), and treatment of complex consideration (cash vs. stock, contingent consideration, escrow holdbacks). In Turkish corporate practice, tag-along rights are recognized in shareholders agreements and supplement TTK’s limited mandatory minority protections. Specific drafting for Turkish targets addresses pay defteri update mechanisms, notarization requirements for share transfers, and dispute resolution.