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Consider an example: A and B are both shareholders in a company, with A being the majority shareholder and B the minority shareholder. C, a third party, offers to buy A's shares at an attractive price, and A accepts. In this situation, tag-along rights would allow B to also participate in the sale under the same terms and conditions as A.
Drag-along right (DAR) is a concept in corporate law, often encountered in the context of venture capital and private equity.. Under the concept, if the majority shareholder(s) of an entity sells their stake, the prospective owner(s) have the right to force the remaining minority shareholders to join the deal.
In accounting, minority interest (or non-controlling interest) is the portion of a subsidiary corporation's stock that is not owned by the parent corporation. The magnitude of the minority interest in the subsidiary company is generally less than 50% of outstanding shares , or the corporation would generally cease to be a subsidiary of the parent.
Shareholder oppression occurs when the majority shareholders in a corporation take action that unfairly prejudices the minority. It most commonly occurs in non-publicly traded companies, because the lack of a public market for shares leaves minority shareholders particularly vulnerable, since minority shareholders cannot escape mistreatment by selling their stock and exiting the corporation. [1]
A "drag-along" will be observed where a majority shareholder will oblige minority shareholders to sell their shares at the same time to a third party; the latter are dragged in to the sale of shares of the former. [2] For example, say Abe owns 55% of Widgets Inc., and wants to sell his shares to Bill for $55. Chuck owns 2 shares of Widgets Inc.
The exclusion of minority shareholders of the company requires: a corporation or a partnership limited by shares (KGaA) as affected society (1), a major shareholder as defined § 327a AktG (2), a "request" from him, the company's shareholders may decide to transfer the shares of minority shareholders on him (3).
In certain circumstances, control may be effectively exercised where the parent holds a minority or none of the shares in the subsidiary. According to Article 22 of the directive 2013/34/EU an undertaking is a parent if it: has a majority of the shareholders' or members' voting rights in another undertaking (a subsidiary undertaking);
The Canada Business Corporations Act (CBCA) and analogous provincial corporation statutes confer appraisal rights on minority shareholders when the following changes to the corporation are proposed: certain amendments to a company's articles of incorporation; an amalgamation, or merger; moving the corporation to another jurisdiction, which is called a "continuance"; selling all or almost all ...