Right of first refusal (ROFR)

A right of first refusal is a common way for closely held companies to control who becomes a shareholder. Instead of banning share transfers outright, it gives existing owners the first chance to keep the shares inside the group before an outsider is allowed in.

How the process usually runs

• The selling shareholder gets a genuine offer from an outside buyer
• That offer, including price and terms, is presented to the other shareholders or the company
• The other shareholders have a set window to match the offer and buy the shares themselves
• If nobody exercises the right within that window, the sale to the outsider can proceed

Where it comes up in a business sale

If a company being sold has shareholders bound by a right of first refusal, the buyer’s deal may need to wait until that right has been offered and lapsed, or waived in writing. Skipping this step can leave a completed sale open to challenge later, so it is one of the first things a buyer’s lawyer checks in the shareholder agreement.