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. Chuck is a shareholder in Widgets Inc. Chuck wants to sell his shares in Widgets Inc. to Barney, for $55. Chuck owns 55% of the company. Bill is also a shareholder, and he owns 2 shares of the company. He does not like the looks of Barney, so he wants to piggy-back in on the deal, and sell his shares too. Thankfully, there IS a piggy-back agreement in the shareholder agreement. Bill notifies both Chuck and Barney in writing of his intentions. Barney must now buy BOTH Bill and Chuck's shares in the company.
