Legal & Compliance
Right of First Refusal (ROFR)
A contractual right allowing a company (or existing investors) to purchase shares before a shareholder sells them to an outside party.
A Right of First Refusal (ROFR) gives the holder (typically the company and/or existing investors) the right to purchase shares that a shareholder wants to sell to a third party — on the same terms the third party is offering. Process: shareholder receives an offer → notifies company → company (and investors) have X days to match the offer → if they don't, shareholder can sell to the third party. ROFRs appear in two contexts: startup charter documents (protecting against unexpected secondary share transfers) and M&A (incumbent investors can match acquisition offers). ROFRs create friction for secondary sales — potential buyers know they may spend time negotiating only to have the ROFR holder swoop in. Many secondaries require ROFR waiver as a closing condition.