Connecticut Right of First Refusal Clause for Shareholders' Agreement is a legal provision that grants existing shareholders the first opportunity to purchase additional shares of a company before they are offered to external parties. This clause aims to protect the interests of current shareholders by ensuring they have the opportunity to maintain or increase their ownership stake in the company. In Connecticut, there are two types of Right of First Refusal (ROAR) clauses commonly used in Shareholders' Agreements. These are: 1. Standard Right of First Refusal Clause: This clause allows existing shareholders to exercise their right to purchase additional shares proportionally to their existing ownership percentage. If a shareholder receives an offer to buy shares from a third party, they must first offer those shares to the existing shareholders at a price and on the same terms as the third-party offer. Existing shareholders then have the option to accept or decline the offer within a specified timeframe. 2. Enhanced Right of First Refusal Clause: This clause goes beyond the standard ROAR clause and gives existing shareholders the right to match or better any offer received by a shareholder from an external party. In this case, if a shareholder intends to sell their shares to a third party, they must first notify the company and provide details of the third-party offer. Existing shareholders then have the opportunity to make a counteroffer within a specified timeframe, matching or exceeding the terms offered by the external party. The selling shareholder can only proceed with the sale to the third party if no existing shareholder exercises their right to match or better the offer. The Connecticut Right of First Refusal Clause for Shareholders' Agreement provides a mechanism for existing shareholders to maintain control over the ownership structure of a company. By giving them priority in purchasing additional shares or matching external offers, this clause ensures that the ownership remains within the existing shareholder base, preventing dilution or unwanted third-party involvement. In summary, the Connecticut Right of First Refusal Clause for Shareholders' Agreement grants existing shareholders the first opportunity to purchase additional shares or match external offers. This provision aims to safeguard shareholders' ownership and control over the company, playing a vital role in shaping the dynamics of ownership within Connecticut corporations.
Connecticut Right of First Refusal Clause for Shareholders' Agreement
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A right of first refusal is a fairly common clause in some business contracts that essentially gives a party the first crack at making an offer on a particular transaction. In real estate terms, the phrase right of first refusal operates similarly.
When you have a first right of refusal the seller must contact you and let you potentially move forward with a purchase before an offer can be accepted from another party. The first right of refusal can be put together either before a home is listed for sale or during the time it is on the market.
When some of the shareholders wish to sell their share, a clause in the shareholder's agreement should state that the shareholders who wish to sell their shares have to show the right to match an offer received from a third party. This is known as the right of first refusal.
To be enforceable, options and rights of first refusal must usually be in writing, signed, contain an adequate description of the property, and be supported by consideration. They may be included in lease contracts, or they may be drafted as standalone agreements.
What Triggers Right of First Refusal? Right of first refusal in real estate is triggered when a homeowner decides to sell their property. If he or she has entered into a contractual agreement that requires them to give someone else the right to purchase the house first, right of first refusal is triggered immediately.
The right of first refusal is usually triggered when a third party offers to buy or lease the property owner's asset. Before the property owner accepts this offer, the property holder (the person with the right of first refusal) must be allowed to buy or lease the asset under the same terms offered by the third party.
Once that is done the ROFR holder has the option of purchasing the property instead or waiving their ROFR and allowing another sale to go through. To get to closing, a title company has to have a signed Waiver of Right of First Refusal document in the file before funding can occur.
Examples. ROFR: Abe owns a house and Bo offers to buy that house for $1 million. However, Carl holds a right of first refusal to purchase the house. Therefore, before Abe can sell the house to Bo, he must first offer it to Carl for the $1 million that Bo is willing to buy it for.
Rights of first refusal clauses are similar to options contracts as the holder has the right, but not the obligation, to enter into a transaction that generally involves an asset. The person with this right has the opportunity to establish a contract or an agreement on an asset before others can.
A "right of first refusal" is a contractual right on the part of a potential buyer to purchase real property within a specified period of time after another potential purchaser submits a purchase offer.
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