Co-sale rights let investors sell a proportional slice of their own shares alongside a founder or major holder who is selling to an outside buyer, on the same price and terms. Co-sale rights are the investor-side name for tag-along protection, and they live in a contract, not a statute.

Investors care because co-sale rights stop a founder from quietly cashing out while they stay locked in. Founders care because these rights shape whether and how they can ever sell secondary stock.

How co-sale rights work

A co-sale clause attaches to a proposed sale by a covered holder, usually a founder. Before that holder sells to an outside buyer, the investors get a window to include a proportional number of their own shares in the same transaction.

The buyer’s total purchase stays the same. The selling founder simply sells fewer shares so the investors can join. Everyone exits at the same price and on the same terms, so no one gets a better private deal.

Co-sale rights paired with a right of first refusal

Co-sale rights almost always travel with a purchase right. In a venture financing the two sit in a single document, the right of first refusal and co-sale agreement. When a founder proposes a sale, the investors get two choices in sequence. First, they can exercise a right of first refusal and buy the shares outright. Second, to the extent they do not buy, they can exercise co-sale and ride along on the sale.

This pairing gives investors real control over founder liquidity. They can keep the shares in-house, or they can share the exit, or both.

Co-sale rights versus tag-along rights

Co-sale rights and tag-along rights describe the same mechanism. The words differ mostly by convention. Venture lawyers documenting a priced round tend to say co-sale. Corporate and private-company practitioners often say tag-along. Both give a non-selling holder the right to join a sale on equal terms. Co-sale rights usually protect holders of preferred stock, and you will see them flagged in your term sheet before the definitive agreement is drafted.

Example: a founder agrees to sell a block of stock to an angel investor who wants in. The company declines its right of first refusal. The preferred investors then exercise co-sale and include their proportional share, so the founder’s private sale becomes a shared one.

This is general information, not legal advice.