A tag-along right lets a minority shareholder join a sale the majority has already negotiated, selling their own shares to the same buyer on the same per-share terms, instead of being left behind as a minority partner alongside whoever the majority sold to.
Our sister firm’s guide to drag-along and tag-along rights in Ontario shareholder agreements defines it directly: “A provision that protects minority shareholders when the majority wants to sell. If the majority shareholder receives a third-party offer to buy their shares, the minority has the right to ‘tag along’ — to sell their shares to the same buyer, on the same terms, alongside the majority.” The same guide gives the timeline: “The minority has a defined period (commonly 20 to 30 days) to elect to exercise their tag-along right.”
A tag-along has a mirror-image cousin worth knowing, because the two are often negotiated as a pair: a drag-along right runs the other direction, letting the majority “compel the remaining shareholders to sell their shares to the same third-party buyer, on the same terms” once the majority has agreed a sale, so the buyer can be assured of walking away with 100% of the company rather than 92% of it. Where a tag-along protects the minority from being left behind, a drag-along protects the majority’s ability to actually deliver a full sale.
A separate summary of Ontario shareholder-agreement terms puts the tag-along’s effect in one line: “Tag-along rights let a minority sell alongside a departing majority on the same terms.” Like the other transfer restrictions in this cluster, a tag-along is enabled at the corporate-law level by CBCA section 6(1)(d), which lets the articles state that share transfers are restricted, though in practice it is usually set out in a separate shareholders’ or unanimous shareholder agreement instead.
A minority shareholder holds 8% of a CBCA corporation whose USA carries a tag-along right. The majority shareholder, holding 70%, agrees to sell its entire stake to a strategic acquirer at $12 a share. Without a tag-along, the minority could be left holding shares in a company now controlled by a buyer it never chose. With the right, the minority notifies the majority it is exercising the tag-along within the agreement’s election window, and the acquirer must also buy the minority’s 8% at the same $12 a share and closing terms — usually no real hardship for the buyer, since a strategic acquirer negotiating to take over a company is typically already assuming it will end up owning all of it, not 92% of it.
See also: Shotgun buy-sell clause · Unanimous shareholder agreement · Right of first refusal.
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