Tag along rights meaning

When considering entry into a joint venture, participants should carefully scrutinise the identity of the other intended parties and the experience and resources they expect to bring to the venture. They are, therefore, likely to want to ensure those parties remain engaged in the joint venture (at least for a pre‑agreed period of time) and to retain controls over to whom they may transfer their shares. The nature of any share transfer constraints adopted will also depend on, among other things, the anticipated duration of the joint venture, how the parties propose to realise their investments, the cash‑flow and fundraising requirements of the parties, and any share transfer restrictions contained in other transaction documents, e.g. financing documents. Restrictions on transfer For these reasons, most joint venture agreements (JVA) (also known as shareholders’ agreements) and/or the articles of association will include a series of restrictions governing the transfer of shares by the joint venture parties...

Drag along and tag along rights Drag along and tag along rights are staple clauses in private equity (PE)/venture capital (VC) and corporate joint venture (JV) agreements and transaction papers for such deals within corporate JVs. Where a PE/VC fund investor, or a shareholder in a corporate JV holding a specified majority of the shares, undertakes a sale of a controlling interest, a drag along right (also called a come along right) permits the selling majority to complete an exit by requiring the remaining minority shareholders to sell their shares as well to a bona fide third-party purchaser on broadly equivalent terms. Conversely, when a majority shareholder chooses to sell, a tag along right (sometimes termed a piggy back right) allows the minority to exit the PE/VC fund or the JV by compelling the selling majority to procure that the third-party buyer extends its offer so it includes the minority shareholders’ shares on substantially the same terms. Accordingly, drag along rights tend to benefit the majority, whereas tag along...

Entering a joint venture (JV) usually calls for significant planning and effort from the JV participants who have chosen to collaborate for mutual benefit, commonly by pooling costs, resources and expertise. At the point of entering into a JV arrangement, the parties may already hold views on the circumstances that could lead to, and the timing of, terminating the JV. Nevertheless, even where there are no clear intentions at the outset about when and in what situations the JV should end, thought should still be given to the events that might result in its termination. The joint venture agreement/shareholders’ agreement (JVA) will often specify, from the start, procedures for ending the JV and the conditions in which a JV party can depart the JV. Ending the JVA is separate from winding up the joint venture company (JVC). Careful consideration should be given to the consequences of ending or exiting a JV. Termination of a JV can take various forms and involve a number of transactions. Typically, ending the JV includes:...

Articles of Association for [ insert name of company ] Limited (Incorporated in England and Wales under registration number [ insert number ]) (Adopted by a Special Resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Model Articles apply to the Company except to the extent that these Articles alter, disapply or conflict with them; subject to any such amendments, exclusions or inconsistencies, the Model Articles shall, together with these Articles, comprise the Company’s articles of association, replacing any other articles or regulations contained in any statute, statutory instrument or other subordinate legislation. 1.2 The whole of Model Articles 11(2) (quorum for directors’ meetings), 12 (chairing of directors’ meetings), 13 (casting vote), 14(1)-(5) (conflicts of interest), 21 (all shares to be fully paid up), 26(5) (share transfers), 30(5)-(7) (procedure for declaring dividends), 39 (chairing general meetings), 42 (voting: general), 44(2) (poll votes), 50 (no right to inspect accounts and other records), 51 (provision for employees on...

Private Company Limited by Shares Articles of Association for [ insert name of company ] Limited (a company incorporated in England and Wales with registered no. [ insert number ]) (adopted by Special Resolution dated [ insert date ] 20[ insert year ]) 1. Model Articles 1.1 The Model Articles apply to the Company save to the extent that these Articles amend, disapply or conflict with them. Subject to any such alterations, exclusions or inconsistencies, the Model Articles together with these Articles comprise the Company’s articles of association, to the exclusion of any alternative articles or regulations contained in legislation, any statutory instrument or other subordinate legislation. 1.2 The following provisions of the Model Articles shall not apply to the Company: 6(2); 7; 8; 11(2); 11(3); 13; 14(1)–14(5) 16; 17; 22; 26(5) 39; 44(2); 50; 51; 52; 53 1.3 In these Articles, any mention of the term ‘chairman’ within the Model Articles shall be interpreted as a reference...

Companies Act 2006: Private Company Limited by Shares — Articles of Association of [ insert name of company ] Limited (Incorporated in England and Wales under registered no. [ insert number ]) (Adopted by special resolution passed on [ insert date ] 20[ insert year ]) 1 Model Articles 1.1 The Company adopts the Model Articles except to the extent that these Articles amend, disapply or conflict with them. Subject to any such amendments, exclusions or inconsistencies, the Model Articles together with these Articles comprise the Company’s articles of association, to the exclusion of any other articles or regulations contained in any Act, statutory instrument or other subordinate legislation. 1.2 The entirety of the following Model Articles shall not apply to the Company: 11(2) (quorum for directors’ meetings) 12 (chairing of directors’ meetings) 13 (casting vote) 14(1)–(5) (conflicts of interest) 21 (all shares to be fully paid up) 26(5) (share transfers) 30(5)–(7) (procedure for declaring dividends) ...