Right to sell / Right to transfer / Option to sell

For the risk investor, the right to sell rate is usually regulated in a contract. However, it is not a liabilities to sell your share of business to a third party.

The saleability of the ownership share acquired by the venture capital investment is typically regulated in the in-syndicate agreements and the in term-sheets. The right to sell rate is an agreement that allows the investor to sell his share of business within a specified period of time and, as the case may be, at a specified price. 

In the framework of a capital increase, the investor makes capital raise available to the startup company, with which he acquires a business share or shares in the company. If it is a startup, the same is done in the form of a founder's financial contribution. However, the parties always stipulate in the contract under what conditions and after how long the acquired share can be sold - this protects the founders. 

On the other hand, the contract also includes collaterals for the investor so that he can have sufficient influence on the operations and decisions of the target company. One such collateral is sell rate or buy rights. In addition, they can stipulate other rights, for example regarding the appointment and recall of senior officials and the right to veto decisions. In the case of venture capital investments, these assets mostly come from the Anglo-Saxon legal system.

In the case of several investors, tag-along and drag-along are often included in the contract. If the founder or one of the investors receives an offer for his share and wishes to take advantage of this opportunity, the right of joint sale gives the other owners the opportunity to part with their share under the same conditions. This is optional, but it gives the investor security in case the founder leaves the company.

Drag-along is the exact opposite of this. This is a buy right. For example, when a new investment round starts and some of the investors want to sell their shares, they can force the other investors, including the founders, to do the same. The meaning of this is that an investor cannot prevent the exit from the company - i.e. the exit. Both tag-along and drag-along rights typically stipulate a minimum price level and a time period from which this can happen.