Problems with selling your business and minority shareholders

Helen Mead

Helen Mead


Drag Along rights… No, not a date with Ru Paul, but a crucial and little-known clause outside legal circles.

So, here is the scenario. You have started your company or your Limited Liability Partnership. From scratch, you have created a multimillion-pound empire. Now you want to sell up and move to the BVI, the Caribbean or maybe even Woking.

And then you hit the problem.

You have a minority shareholder, or a fellow Partner, and they do not want to sell. Without some provision in your articles of association or your shareholder agreement, or some other form of agreement, you will not be able to force your minority shareholder or partner to sell their share. The effect of this might be that they can block the sale of your business.

So, what is a Drag Along right? The Drag Along right allows you, as the majority, to force the minority to sell on the same terms as you have agreed. Simple. Important.

But let us say you are the minority shareholder, and you don’t want to get left behind as a shareholder or a Junior Partner in the business whilst the majority shareholders sell up and move to Bexley?

In that event a ‘Tag Along’ right will allow you to insist your shares, or your interest, in the business are bought out on the same terms as the majority. Equally simple. Equally important.

In the absence of either of these rights you will be left in the position of having to negotiate with a minority shareholder with massive potential leverage on whether the deal goes ahead or not. As a minority, you could be forced to remain in a business with new majority shareholders or Partners you know nothing about.

The alternative to drafting correctly, and including the Drag and Tag Along rights, is Court proceedings and lengthy negotiations (and for lengthy, we mean, of course, ‘expensive’.)

If you are trying to sell your business and are affected by the above, speak to Litigation Partner Jonathan Compton.

If you are a majority or minority business owner and you do not have these provisions in place speak to Corporate Partner, Helen Mead.

Related Services

Read more from this author

  • Brighton - Jubilee St

    1 Jubilee Street


    East Sussex

    BN1 1GE

  • Brighton - Old Steine

    47 Old Steine


    East Sussex

    BN1 1NW

  • Gatwick

    Griffin House

    135 High Street


    West Sussex

    RH10 1DQ

  • Guildford

    Wonersh House

    The Guildway

    Old Portsmouth Road



    GU3 1LR

  • Hassocks

    32 Keymer Road


    West Sussex

    BN6 8AL

  • Horsham

    3rd Floor

    Afon Building

    Worthing Road


    West Sussex

    RH12 1TL

  • London

    6 New Street Square

    New Fetter Lane


    EC4A 3BF

  • Make an enquiry

    Make an enquiry


    Or head to our Contact us page