A tag-along right means that if one of the other shareholders sells shares to a third party, the other shareholders have the right to sell the same share of their holding as the original seller. A drag-along obligation, on the other hand, obliges (e.g. founder shareholders) to sell their holding to a third party if an investor has made decisions to sell and the buyer requires this. The aim of the clause is, above all, to secure a business angel’s possibilities to withdraw from his or her investment in an industrial exit, in other words, by selling the shares to an industrial buyer. In practice, however, there are limits to invoking the clause, as an industrial buyer often wants to acquire, besides the company’s know-how or technology, the management as well.
Other conditions (time interval, turnover, etc.) may also be agreed for a tag-along provision on the basis of which they are valid.
The aim of an anti-lockout clause is to provide the founder shareholders in an acquisition situation with an opportunity to purchase all the shares for themselves under the same terms and conditions as a third party would have purchased them if the founder shareholders do not want to relinquish their holding.
Frequently, a redemption clause, which is more detailed and stringent than articles of association, is specified for shareholders. This ensures that the company’s shares do not end up in the hands of undesirable persons or investors. Occasionally, a provision securing the exit of investors too (compulsory purchases of investors’ shares) is specified. It is triggered if someone purchases alone or together with fellow investors over half the company’s shares and thus obtains control of the company.