Tag Along Rights as Protection for The Minority Shareholders
"Tag Along Rights" can be interpreted as the right to participate. This right is usually regulated in a Shareholder Agreement to protect the interests of minority shareholders if one day any majority shareholder intends to sell all of its shares to a third party. In these case, the minority shareholders often have a high risk of being forced to sell their shares at a lower price than the majority shareholder. To avoid these circumstances, it would be agreed by the shareholders that the minority shareholders shall be given the right to participate in the transaction of selling shares of the majority shareholder if the majority shareholder intends to sell their shares to a third party.
Therefore, if the minority shareholders exercise their rights to participate in the majority shareholders’ share sales, the majority shareholder must include the minority shareholders so that shares owned by the minority shareholders can also be sold to the same prospective buyer, with the same terms and conditions. Therefore basically, it can be understood that if the shares owned by the minority shareholders are not sold and does not obtain a reasonable price, the majority shareholder cannot transfer their shares. In this way, this “Tag Along Rights” will protect the interests of minority shareholders to participate in selling their shares with a worthy price and is considered as a fair solution for both parties.
Suria Nataadmadja & Associates Law Firm
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