In short, the Along tag agreement prevents a majority shareholder from obtaining a profitable exit while minority shareholders sit on their minority stakes without being able to sell them. A drag-along right is a provision or clause in an agreement that allows a majority shareholder to compel a minority shareholder to sell a business. The majority owner who goes through saturation must give the minority shareholder the same price, conditions and conditions as any other seller. ” (62) The shareholder contract (in abbreviated SHA) is essentially a contract between some or all other shareholders of a company whose purpose is to confer rights and impose obligations beyond those provided by the Corporations Act. SHA is a private contract between shareholders in relation to the statutory will of the company, which is a public document. As a private document, it binds the parties and not the other remaining shareholders of the company. The advantage of SHA is that it offers greater flexibility, unlike the statutes. It also provides for the resolution of shareholder disputes and how future capital inflows are to be made. The provisions of the SHA may also violate the provisions of the statutes, in which case statutory provisions would of course be regulated and not those of the SHA. A drag along clause allows a large shareholder (or group of shareholders) to “pull” other shareholders into a joint sale of the entire company. “(64) Shareholders may enter into an agreement in the best interests of the corporation, but the only good of the company, but the only thing is that the provisions of the SHA are not contrary to the statutes. The main objective of the SHA is to take steps to ensure proper and effective internal management of the company.
It can visualize the best interest of the company for different topics and also find different ways, not only for the most good shareholders, but also for the company as a whole….. total control of a company. Drag Along rights eliminates minority owners and sells 100% of a business to a potential buyer. The aim is to provide a majority shareholder with liquidity, flexibility and a simple way out. In this case, the company`s board of directors made a decision authorizing the issuance of preferential rights in accordance with the company`s AOA, although such a action required the complainant`s favourable vote, in accordance with a shareholders` pact between the company`s shareholders. The Corporate Counsel had held that the above provision was not applicable and that the Board`s decision authorizing the issue of preferential law had not been included in the AOA, since the provisions of the shareholders who gave a japtive agreement to the complainant had not been included in the AOA and the Board`s decision authorizing the issue of preferential law was valid.