Tag along, drag along, leaver: exit clauses explained

Tag along lets a minority shareholder sell on the same terms as the majority owner who gives up control. Drag along forces every shareholder to sell when a buyer wants 100% of the shares. Good and bad leaver clauses set the price of a departing manager's shares. All of it is negotiated before you sign.

I read these clauses in a set order. Drag along first, because it can make you sell your company. Leaver next. Tag along last.

What is a tag-along clause?

Tag along, also called a co-sale clause, gives a minority shareholder the right to sell at the same price and on the same terms as the majority owner who gives up control. In principle the buyer must then also take the minority's shares, or the deal does not close.

When a fund comes in at 20 or 30%, the fund is the one asking for this clause. It does not want to end up facing a new majority owner it never chose.

In percentages: you hold 70%, the fund 30%. A trade buyer wants your 70%. With a tag along, it must also offer to buy the fund's 30% at the same price per share. If it had only budgeted for your shares, the deal grows by 43%. The point to negotiate is the trigger: does the clause apply only on a change of control, or on any sale?

What does drag along allow, and how far can it go?

Drag along, or forced-sale clause, obliges the other shareholders to sell when a buyer wants 100% of the company. It exists so that a minority holder cannot block a full sale. For the owner-manager, the risk runs the other way: having to sell at a time or a price you did not choose.

Three protections are negotiable:

1. a high threshold, expressed as a percentage of share capital, to trigger the clause;
2. a floor price, or a minimum multiple of the fund's investment, below which the clause does not apply;
3. a delay: no activation before a set number of years.

Closed-end funds ask for this clause, because they must return money to their investors before a fixed date.

The fund's horizon tells you how much pressure will sit on that clause. Checked on the funds' websites on 15.10.2026: Theodorus publishes closed-end funds of 12 to 14 years (Theodorus II and III); Invest.BW (the Walloon Brabant provincial invest) states interventions typically lasting 5 to 10 years; ORSA describes itself as an evergreen fund with no imposed exit horizon. The difference is explained in evergreen vs closed-end fund.

What does a bad leaver risk?

A bad leaver must sell back their shares at a discount, sometimes at nominal value. A good leaver sells them at market value, calculated with the method written into the agreement.

The clause is fair when it punishes conduct, not bad luck. A balanced list looks like this:

• good leaver: retirement on the planned date, disability, death, dismissal without serious misconduct;
• bad leaver: resignation before a given date, removal for serious misconduct, breach of the non-compete;

A case built for illustration. You hold 30% of a company that the agreement's method values at €4M. As a good leaver, your shares are worth €1.2M. As a bad leaver bought back at nominal value, you recover the nominal value of your shares, whatever growth came since. The gap runs into hundreds of thousands of euros.

In the agreements I review, the first case I look for is dismissal without serious misconduct. It is the one that costs most when it is missing, because it does not depend on you.

The discount can also shrink over time. A manager who leaves after six years is not in the same position as one who leaves after six months, and a decent agreement says so.

Which clause applies in which situation?

What does Belgian company law say?

The Companies and Associations Code (CSA, the federal code governing Belgian companies), in force since 2019, allows restrictions on share transfers. They can sit in the articles of association, the terms of issue or an agreement. The text is available on ejustice.

This table holds in Namur, Brussels and Ghent alike: the CSA is federal. The regional difference is who sits across the table. In Wallonia, it is the provincial invests (Noshaq, Namur Invest, Sambrinvest, IMBC, Invest.BW) and Wallonie Entreprendre (the Walloon Region's public finance body). In Brussels, finance&invest.brussels (the Brussels-Capital Region's public finance body) invests up to €5M in SMEs, alongside other investors. In Flanders, the public tool is PMV; its terms are not part of my survey.

Pre-emption or approval: which one blocks a sale?

Approval blocks more. Pre-emption still lets you sell, but to a different buyer than the one you found. Approval lets the others reject the buyer outright.

In a family SME, pre-emption is often forgotten for transfers between family members. In an SRL, the statutory approval does not apply to a transfer to a spouse, legal cohabitant or descendants (art. 5:63). If you want a say, write it down.

Six reflexes before signing

• Set a trigger threshold and a floor price for the drag along.
• Define bad leaver through a closed list of cases.
• Provide for a bad leaver discount that shrinks over time.
• Refuse a drag along the minority fund can trigger alone.
• Do not let dismissal without misconduct be classed as bad leaver.
• Remember pre-emption for transfers between family shareholders.

These clauses sit inside a wider framework, covered in the guide to the shareholders' agreement. And if you are still choosing a fund, compare their exit horizons in the ranking of SME funds before discussing clauses. Final drafting belongs to your lawyer: the reach of a drag along depends on every word.