The Right of First Refusal Clause in a Shareholders' Agreement is a legal provision that grants existing shareholders in a Missouri-based company the opportunity to purchase additional shares before they are offered to a third party. This clause ensures that current shareholders have the first opportunity to maintain or increase their ownership stake in the company. The primary objective of the Right of First Refusal (ROAR) clause is to protect shareholders' interests and maintain the existing shareholder base by preventing dilution or external control. It allows shareholders to safeguard their investment, maintain control over the company's decision-making process, and protect their financial and strategic interests. There are two main types of Right of First Refusal Clauses commonly used in Missouri Shareholders' Agreements: 1. Standard Right of First Refusal: This type of ROAR clause gives existing shareholders the right to purchase additional shares in the company before they are offered to external parties. When a shareholder intends to sell some or all of their shares, they must first offer these shares to the other existing shareholders. Each shareholder has the option to accept or decline the offer within a specified timeframe, typically outlined in the Shareholders' Agreement. If any shareholder declines the offer, the selling shareholder can proceed with selling the shares to a third party. 2. Super Right of First Refusal: The Super Right of First Refusal goes beyond the standard ROAR by granting existing shareholders the option to purchase shares not only when a shareholder decides to sell, but also in scenarios where the company plans to issue new shares. If the company intends to offer newly issued shares to external parties, the Super ROAR clause gives existing shareholders the right to acquire these shares first. This type of clause provides additional protection by allowing shareholders to prevent any dilution of their ownership percentage. Both types of ROAR clauses aim to maintain the existing shareholder base, strengthen shareholder control, and minimize the risk of unwanted third-party involvement or dilution of ownership interests in a Missouri-based company. It is crucial to carefully draft and include these clauses in a Shareholders' Agreement to ensure the rights and interests of all parties involved are adequately protected.
Missouri Right of First Refusal Clause for Shareholders' Agreement
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FAQ
A right of first refusal, different from a right of first offer, gives the right holder the option to match an offer already received by the seller. A right of first offer is said to favor the seller, while a right of first refusal favors the buyer.
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.
Most of us are familiar with the right of first refusal (ROFR) but not with the right of first offer (ROFO). Generally, a ROFR is advantageous to the purchaser and the ROFO is advantageous to the seller.
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.
A right of first offer (ROFO) allows someone the opportunity to make the first move when a homeowner is looking to sell. Unlike a right of first refusal where an owner may be obligated to sell to the potential buyer under the original contract's terms, the seller is still free to market the property for sale to others.
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.
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.
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.
Written agreement that allowed a right of first refusal to be assigned only with the written con- sent of the grantor, a college). 49 31111 2d 620,203 NE2d 411 (1964). At the other extreme, the parties' contract might expressly de- clare that the right of first refusal is personal, and courts will usually agree.
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.
