Form with which a corporation advises that it has resolved that some shareholders shall be required to give the corporation the opportunity to purchase shares before selling them to another.
The South Carolina Corporate Right of First Refusal (ROAR) is a legal mechanism that grants existing shareholders of a corporation the opportunity to purchase additional shares of the corporation before those shares can be sold to a third party. This right is typically outlined and governed by corporate resolutions. The purpose of the Corporate ROAR is to protect the interests of existing shareholders by ensuring that they have the first opportunity to maintain or increase their ownership in the corporation. It allows shareholders to maintain their existing proportionate ownership levels and prevent dilution of their shares. There are two types of Corporate ROAR commonly used in South Carolina: 1. Permissive Right of First Refusal: This type of ROAR gives existing shareholders the option, but not the obligation, to purchase the offered shares before they are sold to a third party. The shareholder can choose to exercise their right or waive it, allowing the shares to be sold to an outside party. The price and terms of the sale must be disclosed to the existing shareholders, who can then make an informed decision. 2. Mandatory Right of First Refusal: Under this type of ROAR, existing shareholders are obligated to purchase the offered shares on the same terms and conditions as offered to the third party. If the shareholders decline to exercise their right, the shares must be sold to the third party. This type of ROAR provides less flexibility to the existing shareholders but ensures that they are given the first opportunity to acquire the shares. The South Carolina Corporate ROAR is typically included in the corporate bylaws or shareholder agreement. It is important for corporations to have well-drafted resolutions that clearly outline the rights and obligations of existing shareholders regarding the ROAR. These resolutions should specify the procedure for exercising the right, timelines for responses, and any additional terms and conditions, such as price determination methods or restrictions on transferring the acquired shares. Overall, the South Carolina Corporate Right of First Refusal serves as an effective tool for protecting the interests of existing shareholders and maintaining the stability of the corporation's ownership structure. By giving shareholders the priority to purchase additional shares, it helps preserve their control and prevent unwanted outside ownership.
