Right Of First Offer Shareholders Agreement

In the shareholders` agreement, a ROFR requires that an investor who has officially received an appropriate offer to purchase from a foreigner give other signatories the opportunity to respond to that offer before entering into an agreement with the outside world. The outsider`s offer must conform to general decency and must not be fraudulent. On the other hand, an ROFO normally requires a party wishing to offer its shares to offer to sell the shares to the other party or parties to the agreement before seeking potential buyers beyond the existing parties. In this way, a ROFO allows the triggering of the determination of the exit, without the offering party first having to cover a third-party buyer. If the existence of a ROFR offers a sufficient deterrent effect on exit, it follows that it becomes more attractive for shareholders to leave the company collectively (sell) rather than sell individually. Thus, a ROFR can keep shareholders together in achieving the same goals in order to maximize the value of the company while selling it. In a ROFR mechanism, the selling shareholder must obtain an offer from a third party before offering his shares to non-selling shareholders. Pre-emption clauses can be adapted to create variations of the standard agreement. As such, the parties can make changes, for example. B the indication of the period of validity of the right or the possibility for a third party designated by the buyer to make the purchase. As a rule, pre-emption agreements are linked over time.

At the end of the period, the seller is free to sue other buyers. The question that arises is therefore how to choose between a ROFR and a ROFO. The selling shareholder is then free to accept or refuse the offer. If they refuse, they are free to sell it to third parties at a higher price. Pre-emption rights often increase the duration of the transaction by several months and create great uncertainty for potential third-party buyers and selling shareholders. In the business world, pre-emption rights are often seen in joint venture situations. . . .