Drag Along Right as the Protection for Majority Shareholders

Agreement regarding the rights and obligations of the shareholders should be detailed in the shareholder agreement in accordance to the agreement of the parties. One of the arrangements that is often used in the shareholder agreements is “Drag Along Right”. Drag Along Right is given to majority shareholders to drag along the minority shareholders to sell their shares if the majority shareholders want to sell their shares to third parties at the same price and conditions. This arrangement is believed to provide more protection for the rights of majority shareholders.

By dragging the minority shareholders to also sell their shares, the majority shareholder can avoid the possibility of a minority shareholder thwarting the sale of the company's shares or inhibiting the sale of shares. The arrangement regarding Drag Along Right shall make it easier for majority shareholders and the company if they wish to fulfill the request of any prospective buyer who intends to buy all of the company's shares, therefore this clause is also often used as a basis in the agreement to regulate the possibility if one day the company may carry out mergers and acquisitions.

Suria Nataadmadja & Associates Law Firm

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