Economics · Venture Capital and Shareholder Agreements
What is the fundamental purpose of including 'Tag-Along' and 'Drag-Along' clauses in a Shareholders Agreement during a Venture Capital deal?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1To legally ensure that the company never distributes dividends to equity shareholders under any financial circumstance.
- 2To allow founders to withdraw unlimited corporate compensation from the invested capital without board oversight.
- 3To protect the respective rights of minority and majority shareholders during a future exit, acquisition, or sale of the company.✓
- 4To specify the geographic territories where the company can manufacture and test its proprietary technology.
Correct answer
To protect the respective rights of minority and majority shareholders during a future exit, acquisition, or sale of the company.
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