Drag-Along Right
Definition
A contractual right held by a defined majority of shareholders to compel all other shareholders to approve a liquidity event on the same terms. Drag-along rights are typically held by preference shareholders above a defined threshold and are designed to prevent a minority of common shareholders from blocking an acquisition that the majority has approved.
Common Misapplication
The most common misapplication is failing to review the drag-along threshold before entering an acquisition negotiation. If the drag-along threshold requires approval from shareholders holding a majority of preference shares and a majority of common shares separately, a minority of common shareholders may be able to block an acquisition even if all preference shareholders approve it.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.5: The Liquidation and Exit Mechanics Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Drag-Along Right. https://ffistandard.org/glossary/drag-along-right/. 2026.