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A right of first refusal is a contractual right giving its holder the option to transact with the other contracting party before others can. The ROFR assures the holder that they will not lose their rights to an asset if others express interest.
What is right of first refusal? Right of pre-emption gives shareholders the right to buy shares from another shareholder on the same terms as agreed with an external party before the external party may buy them. In other words, ROFR is the right to buy existing shares before outsiders can.
A right of first refusal?often abbreviated as ?ROFR? (pronounced ?roafer?)?gives the holder of the right ?first dibs? on any potential share sale. Also known as a ?last look? provision, ROFRs are a common feature in venture financings.
In a typical right of first refusal, a shareholder wishing to sell his or her shares must first strike a deal with a third party to sell his or her shares. That third party has to commit to the basic terms of a purchase of some or all of the shareholder's shares.
A Private Equity Rights of First Refusal Agreement requires shareholders to first offer their shares to other owners. Those shareholders will have a set time period to buy them before they can be offered to outsiders.
In real estate, the right of first refusal is a clause in a contract that gives a prioritized, interested party the right to make the first offer on a house before the owner can negotiate with other prospective buyers.
Right of first refusal is common for renters who may want the option to buy their current rental property at the end of their lease. With ROFR, they get the opportunity to make an offer on the property before the landlord starts accepting public offers.
This contractual right, also known as ROFR, gives an individual or an entity the option to participate in a business transaction before that opportunity is offered to a third party.