Purpose The main purpose of tag-along rights is to protect minority shareholder interests in any transaction. Majority shareholders are usually big firms with many connections, better negotiating power and stronger capital, and as such are more likely to be able to find a buyer for their shares. Hence, tag-along rights allow the minority shareholder to increase the liquidity of their shares because he or she will be afforded the opportunity to participate in any deal struck by the majority and prevent them from being “left-behind” in a deal. Another reason is that when a majority owner sells his or her stake in a business, this dominant position allows the seller to sell at a price higher than the intrinsic price of the share itself, called a control premium, because the majority holder possesses a higher degree of freedom to make their decisions for the company. Tag-along rights allow minority holders to also join in this premium and be able to sell their shares at this higher price in any sale between a majority and a third party. Because tag-along rights are rights and not obligations, minority shareholders may or may not choose to exercise them. This allows minority shareholders to have a choice in the event of a majority of the equity changing hands. They can elect to either remain an owner of the company or invoke the tag-along rights and participate in the sale. A downside of tag-along rights is that, because they protect minority interests, the majority shareholder takes on the more onerous task of taking into account the shares of the minority in negotiating a sale, which “may diminish the marketability of the shares”. There is also uncertainty regarding which minority shareholders will participate in the sale, which could also have an impact on the final purchase price. The fact that tag-along rights requires tagging shareholders to sell shares "under the same terms and conditions" as the majority shareholders can also be a double-edged sword. This is because in some cases these minority shareholders might want to avoid certain obligations, such as exposure to indemnity claims relating to the company, that the majority shareholder is beholden to. Enforceability Tag-along rights are a form of contract clause and therefore not enshrined in statutes. As such, they have to be agreed upon by the parties beforehand in a shareholders’ agreement. Unlike a company's articles of association, these shareholders’ agreements