North Dakota Right of First Refusal Clause for Shareholders' Agreement

State:
Multi-State
Control #:
US-01770
Format:
Word; 
Rich Text
Instant download

Description

This is a model clause for a shareholder's agreement addressing Right of First Refusal. If a shareholder wishes to sell shares, the company will be given notice and has the right to buy the shares during a certain limited time period. Adapt to fit your circumstances.

The North Dakota Right of First Refusal Clause for Shareholders' Agreement is a crucial provision designed to protect shareholders' rights and ensure that they have the opportunity to purchase additional shares in the company before they can be sold or transferred to third parties. This clause grants existing shareholders the first opportunity to purchase the shares, maintaining their ownership stake and preserving control over the company's future. Under the North Dakota Right of First Refusal Clause, if a shareholder intends to sell or transfer their shares, they are required to first offer them to the existing shareholders at a fair market price or a predetermined price specified in the agreement. The existing shareholders then have the right to either accept or decline the offer within a specified time frame. If they choose to decline, only then can the shareholder proceed with the sale or transfer to a third party. There are two main types of North Dakota Right of First Refusal Clauses for Shareholders' Agreement: 1. Standard Right of First Refusal: This type gives existing shareholders the right to match the terms of the offer and purchase the shares on the same terms as the proposed third-party offer. If they choose not to exercise this right, the shareholder is free to proceed with the sale or transfer to the third party. 2. Enhanced Right of First Refusal: This type provides existing shareholders with an extra advantage by allowing them to have a right to purchase the shares on terms more favorable than those offered by the third party. If the existing shareholders are willing to match or exceed the third-party offer, they can supersede the third-party offer and acquire the shares under better terms. The North Dakota Right of First Refusal Clause serves as a valuable safeguard for shareholders' investments, ensuring that they have the ability to control who becomes a shareholder of the company. By employing this clause in a Shareholders' Agreement, companies can maintain stability, prevent unwanted ownership changes, and preserve the overall vision and direction of the business. It also protects minority shareholders from being overshadowed by larger shareholders or outside investors. In summary, the North Dakota Right of First Refusal Clause is a crucial legal provision granting existing shareholders the priority to purchase shares in the company before they can be sold to third parties. It promotes stability, preserves ownership control, and safeguards shareholders' interests.

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FAQ

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.

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 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 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.

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.

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.

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.

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.

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.

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North Dakota Right of First Refusal Clause for Shareholders' Agreement