What Is A Co-Sale Right?

It’s not uncommon for preferred investors to require that startup founders enter a co-sale agreement. Co-sale rights give investors the right to join in a transaction when the founders sell their stock to a third-party. Co-sale rights, also called tag-along rights, allow investors to sell their shares on the same terms as the founders.

Intended to protect investors, these rights are often paired with the right of first refusal, a separate right which gives the investor an opportunity to purchase the founders stock if they decide to sell to a third-party.