Rights of First Refusal (ROFR)
A right of first refusal is a contractual right that gives its holder the option to enter a business transaction with the owner of something, according to specified terms, before the owner is entitled to enter into that transaction with a third party.
What is a ROFR?
A ROFR, right of first refusal, also known as first right of refusal, is a contractual right to enter into a business transaction with a person or company before anyone else can. If the party with this right declines to enter into a transaction, the obligor is free to entertain other offers. This is a popular clause among lessees of real estate because it gives them preference to the properties in which they occupy.
What are rights of first refusal?
Right of first refusal (ROFR), also known as first right of refusal, is a contractual right to enter into a business transaction with a person or company before anyone else can. If the party with this right declines to enter into a transaction, the obligor is free to entertain other offers. This is a popular clause among lessees of real estate because it gives them preference to the properties in which they occupy.
What is the purpose of a ROFR?
A ROFR is put in place so that the company can limit who owns the equity. By doing this, they are able to preserve the integrity of their cap table and company ownership.
Is it possible to circumvent a ROFR?
It is only possible with specific approval from the appropriate directors within the company. These are not granted often and are best approached as a one-off request.
