This provides one group of shareholders the right to sell their stock under the same conditions when another group sells theirs.
Co-sale Agreement is also called take-me-along or tag-along provision. This provides one group of shareholders the right to sell their stock under the same conditions when another group sells theirs. In a venture capitalist deal, any sales that make a shareholder or investor cross a certain ownership percentage will enable clauses like this to be used to make sure that an investor will take part on a pro-rata basis.
Simple put, it provides the minority shareholders the right to take part when the majority shareholders sell their shares. So, if a majority shareholder sells their stock for $50, every investor can get the same deal with a co-sale right. A co-sale agreement is generally paired with a ROFR (right of first refusal). A company’s shareholder with a ROFR clause can buy a major part of a stockholder’s shares if he wants to sell them to a third party. Doing so will keep the control of the business within the existing shareholders if they do not want anyone else in the company.