Piggy-back (law)

Piggy-back (law)

Piggy-back applies to contractual agreements in law, more specifically shareholder selling rights. To apply, the piggy-back clause MUST be included in the corporation's shareholder agreement, which is part of the incorporation materials.

If one shareholder decides to sell shares to a third party, and if the sale of the shares would result in a change of control of the corporation, the offeror must notify all other shareholders. The other shareholders can 'piggy-back' into the original shareholders offer to the third party, and offer to sell their shares to the third party for the same agreed upon price. In order to purchase ANY of the shares, the third party must then purchase ALL shares included by the original shareholder, and any subsequent piggy backers.
* Eg. Abe owns 55% of Widgets Inc. and wants to sell his shares to Bill, for $55. Chuck owns 2 shares of Widgets Inc. He does not like the looks of Bill, so he wants to piggy-back in on the deal, and sell his shares too. The sharehold agreement includes a piggy-back agreement. Chuck notifies both Abe and bill in writing of his intentions. Bill must now buy BOTH Abe's and Chuck's shares in the company.

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