Did You Know? · Corporate & Commercial Contracts
Do you know a drag-along right can force a founder to sell shares they never agreed to sell?
Without carve-outs on price floor, timing or consent thresholds, a drag-along can bind a founder to an exit they had no real vote on.
A drag-along clause lets a defined majority of shareholders (often the investor group plus promoters above a threshold) compel all other shareholders to sell their shares on the same terms in an exit transaction. Without carve-outs on price floor, timing, or founder consent thresholds, a poorly negotiated drag-along can bind a founder to an exit they had no real vote on.