Right of First Refusal
From LawDepot Law Library
Definition of "Right of First Refusal"
A right of first refusal requires that when an existing shareholder wants to sell his shares, all shares must first be offered to existing shareholders on a pro rata basis, which enables the existing shareholders to maintain their percentage stake in the Corporation, before being sold to an outside third party. It also protects existing shareholders from unwelcome new shareholders. However, if the existing shareholders cannot afford to buy the shares, the shares may still be sold to the third party and existing shareholders may end up with a new co-owner. One shortcoming of the right of first refusal is that it may cause delays in the sale of shares.
