A tag along agreement, also known as a co-sale agreement, is a contractual provision that protects minority shareholders in the event of a company sale or merger. This agreement allows minority shareholders to “tag along” with majority shareholders and sell their shares at the same price and terms as the majority shareholders. In Germany, a tag along agreement is referred to as “Mitschleifklausel.”
The purpose of a tag along agreement is to provide minority shareholders with some protection against being left behind in the event of a company sale or merger. Without a tag along agreement, majority shareholders could sell their shares and leave minority shareholders with limited options. However, with a tag along agreement in place, minority shareholders have the opportunity to sell their shares at the same price and terms as the majority shareholders.
In Germany, a tag along agreement is governed by the German Commercial Code (HGB). The HGB requires that all shareholders be treated equally in the event of a sale or merger, which means that minority shareholders cannot be disadvantaged by the actions of majority shareholders.
A tag along agreement can also be beneficial to potential buyers, as it may help to ensure that all shareholders are on board with the sale or merger. If minority shareholders are not included in the agreement, they may refuse to sell their shares, which could complicate the deal.
It is important for both majority and minority shareholders to seek the advice of legal professionals when drafting a tag along agreement. The terms of the agreement can be complex and will need to be carefully considered to ensure that all parties are protected. Additionally, the agreement should be reviewed and updated regularly to ensure that it remains relevant and in compliance with current laws and regulations.
In conclusion, a tag along agreement is a crucial element in protecting minority shareholders in a company sale or merger. In Germany, this agreement is referred to as “Mitschleifklausel” and is governed by the German Commercial Code. It is important for all shareholders to seek legal advice when drafting a tag along agreement to ensure that everyone is adequately protected and that the agreement is in compliance with current laws and regulations.