Right Of First Refusal Shareholder Agreement

c) transmission to third parties. If none of the shares put up for sale are offered for sale by the other shareholders, the selling shareholder may transfer the remaining shares to a person or person, but only within 90 days of the seller`s notification date. However, the selling shareholder may not sell or transfer any of the shares for sale at a lower price or on more advantageous terms that are more favourable to the buyer or assignee than those indicated in the seller`s communication. At the end of the 90-day period, the procedure for the first offer to the company and other shareholders will apply again. If only a portion of the shares for sale is acquired by the other shareholders and the other purchaser chooses not to acquire the other shares, the selling shareholder may decide not to sell shares. One of the main concerns of shareholders when negotiating shareholder agreements is to limit the transfer of shares to third parties who are involved (potentially competitors or parties deemed undesirable to cooperate with them). The ROFR or ROFO mechanisms address these concerns in different ways, if a shareholder is unable to raise the money to buy the shares, then he cannot participate. These are the purchase rights, not the rights to prevent another shareholder from selling. The rights to the first refusal often increase for months of the transaction period and create great uncertainty for potential third-party buyers and for the sale of shareholders. In the business world, the rights of the first rejection are often seen in joint venture situations.

Partners in a joint venture generally have the right to refuse to buy shares of other partners who leave the company. Similarly, as part of a shareholders` agreement, a ROFO grants unsold shareholders the right to acquire stakes in selling shareholders before they are offered to the public. A pre-emption right gives the company and other shareholders the opportunity to purchase the shares before the sale. That`s how it works. The right of pre-emption (ROFR), also known as the first right of refusal, is a contractual right to transfer a transaction with a person or company before someone else can. If, with this right, the party refuses to enter into a transaction, the debtor is free to have other offers.