Right of First Refusal and Co-Sale Agreement
The Right of First Refusal and Co-Sale Agreement is a legal document crafted for corporations and purchasers of preferred stock. This agreement grants the company and stock purchasers specific rights concerning the transfer of equity securities. Unlike standard stock transfer agreements, this form establishes rights of refusal and co-sale options, ensuring that existing shareholders can retain control over stock ownership before shares are sold to third parties.
- Restrictions on Transfer: Details the limitations placed on the Founder regarding the sale of equity securities.
- Rights of Refusal: Outlines the company's option to purchase shares before they are offered to outside buyers.
- Co-Sale Rights: Allows holders of preferred stock to participate in the sale of equity securities if the company declines its purchase options.
- Transfer Notices: Mandates that the Founder provide detailed notification to the company and purchasers before transferring shares.
- Non-Exercise of Rights: Specifies the terms under which the Founder can sell shares if the rights are not exercised.
This form is necessary when a corporation intends to issue preferred stock and wants to establish procedures for future equity transfers. It is particularly useful in situations where existing shareholders wish to control who can buy equity in their company, thereby protecting their investments and governance interests.
This form is suited for:
- Corporations issuing preferred stock.
- Founders looking to provide protective measures for their shares.
- Purchasers of Series A Preferred Stock wanting security in the ownership structure.
- Investors interested in ensuring their rights in equity transactions.
To complete this agreement, follow these steps:
- Identify the parties involved, including the corporation, founder, and purchasers of preferred stock.
- Specify the restrictions on the transfer of shares and clarify what constitutes equity securities.
- Detail the rights of refusal, including how notifications must be given and the timelines involved.
- Include terms governing co-sale rights and outline how participation in sales can be executed.
- Address any provisions regarding prohibited transfers and remedies for violations of the agreement.
Notarization requirements for this form
Notarization is not commonly needed for this form. However, certain documents or local rules may make it necessary. Our notarization service, powered by Notarize, allows you to finalize it securely online anytime, day or night.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Common mistakes
- Failing to provide proper Transfer Notices to all required parties.
- Not adhering to the specified timelines for exercising purchase options.
- Overlooking the completion of necessary documentation, such as certifications and acknowledgments.
- Neglecting to properly define equity securities, leading to potential disputes.
Why complete this form online
- Instant availability for downloading, saving time compared to traditional legal processes.
- Editable templates ensure you can customize the form to meet your specific needs.
- Access to legal expertise in drafting, as the forms are created by licensed attorneys.
- Convenience of filling out the form at your own pace from any device.
Legal use & context
- This agreement provides a legal framework to protect shareholder interests during stock transfers.
- Ensures all parties have a clear understanding of their rights and obligations.
- Helps mitigate disputes between shareholders and founders during transitions.
Quick recap
- The Right of First Refusal and Co-Sale Agreement protects existing shareholders during stock transfers.
- Clear definitions and procedures must be established to avoid disputes.
- Timely notifications and adherence to agreed timelines are critical for compliance.
- Online accessibility of the form enhances convenience and flexibility for users.
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FAQ
Depending on your needs, the cost of negotiating a right of first refusal for your transaction can vary signficantly. Hourly rates for corporate lawyers in the Priori network with experience negotiating ROFRs can vary from $150 per hour to $550 per hour.
A right of first refusal agreement allows a buyer and seller to enter into an arrangement by which the potential buyer is given the first crack at a property when it goes up for sale.
A right of first refusal agreement allows a buyer and seller to enter into an arrangement by which the potential buyer is given the first crack at a property when it goes up for sale.
The right of first refusal and co-sale (ROFR/Co-sale) work together to prevent a founder or major common shareholder for selling shares without the company and the investors being allowed to purchase the shares or participate in the sale of the shares.
Every RFR should be drafted as either an agreement or a contract (in which the holder gives some consideration, or pays for, the right). It may bind the current owner alone or run with the land. In either case, I would advise having it recorded.
A person holding a right of first refusal has the option to accept a business offer before anyone else. This right covers most assets, including business transactions and real estate. For example, a business owner may have the first right to consider buying or selling a supplier's goods.
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.
The right of first refusal applies to sales as well as rentals. And with any sale or rental, the board has the opportunity to exercise its right of first refusal or to waive that right.The bylaws state that if the board does not exercise its rights within a certain period, it is deemed waived.
