Drag-along Rights

Drag-along rights enable majority stockholders to “drag along” minority stockholder shares in an acquisition. This right is often negotiated by investors so that they can sell a company through a stock acquisition even when minority stockholders do not want to sell their shares. Founders, who are usually minority stockholders, may be resistant to granting these rights because they can enable investors, who usually have a liquidation preference, to negotiate sales where the investors benefit and the minority stockholders do not.