Drag-along rights allow majority shareholders, when they agree to sell the company, to compel minority shareholders to sell their shares too — on the same price and terms. The purpose is to let a buyer acquire 100% of the company without a small holder blocking the deal.
Why it matters to you
As a minority unlisted-share holder, drag-along means you can be forced to sell if the controlling shareholders accept an acquisition — even at a price you would rather decline. The flip side is protection: the terms must be the same for everyone, so you cannot be squeezed out on worse terms than the majority.
Example: When a strategic buyer acquired a startup, drag-along rights obliged all minority holders, including pre-IPO retail buyers, to sell at the agreed price. Drag-along is the mirror image of tag-along rights.