What type of clause do venture capitalists obtain if they want to ensure that major shareholders will vote their way on a sale of the company?
Answer: (c), Drag along rights
"Drag along rights" refer to a contractual right in an investment contract that large or majority shareholders sometimes insist upon to compel the minority shareholders to sell when a purchaser wants to acquire 100% of the company. The major shareholder can thus "drag along" minority shareholders and require them to vote in favor of a sale and tender their shares in the sale. The drag along right is intended to protect the large or majority shareholder from dissenting minority shareholders who could hold up or adversely affect a sale of the company. Typically, the drag along provision requires the minority shareholders to receive the same consideration, price and terms available for the major shareholder's shares. Drag along rights are sometimes insisted upon as a condition to a venture capitalist's investment in a company.
