What It Does
A right of first refusal (ROFR) clause gives a designated party the right to match a bona fide third-party offer before the owner can complete a sale to that third party. The owner who receives an offer must present its material terms to the holder, who then chooses to buy on the same terms or step aside. It appears in shareholder and LLC operating agreements, joint ventures, commercial leases, and licensing deals. The holder has the right to buy and may decline to exercise it, and must act within a set matching period.
Lets the holder match a third-party offer and take the deal on the same terms
Triggers when the owner receives a bona fide offer it is willing to accept
Requires the owner to give written notice of the offer's material terms to the holder
Runs a matching period, commonly 20 to 60 days in commercial agreements, for the holder to act or pass
Controls who can acquire shares, membership interests, or assets the parties want to keep close
In shareholder and joint venture agreements, rights of first refusal increasingly sit alongside right-of-first-offer and co-sale terms as a full transfer-restriction package.
When You'll See It
Beyond real estate, a right of first refusal appears most in shareholder agreements, LLC operating agreements, joint venture agreements, commercial leases, and licensing deals. It is a standard transfer restriction wherever the parties want to control who joins the ownership group. The drafting varies most in the trigger definition and the matching period. See also: change of control, assignment, and exclusivity.
Examples
Emulate Therapeutics, Inc.
Optionee, Stock Option Agreement
Equity ROFR · Company repurchase right
One-Sided
2022
"in the event the Optionee ... proposes to sell, exchange, transfer, pledge, or otherwise dispose of any shares acquired upon exercise of the Option ... the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section 11 (the 'Right of First Refusal')."
Renren Inc.
Participant, Restricted Share Unit Agreement
Notice mechanics · Cash price disclosed
One-Sided
2023
"Such notice will specify the identity of the proposed transferee, the cash price offered for the Offered Shares by the proposed transferee (or, if the proposed Transfer is one in which the holder will not receive cash, such as an involuntary transfer, gift, donation or pledge, the holder will state that no purchase price is being proposed)."
Terran Orbital Corp.
Participant, Equity Incentive Award Agreement
Pre-IPO equity · Repurchase on transfer
One-Sided
2022
"in the event ... the Participant ... proposes to sell, exchange, transfer, pledge, or otherwise dispose of any such Shares ... the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in this Section (the 'Right of First Refusal')."
Embassy Bancorp, Inc.
Red Bird, Lease Agreement
Real-property ROFR · 30-day match
One-Sided
2023
"Embassy shall have a right of first refusal to purchase such property on the terms contained in such written offer. Red Bird shall provide written notice of any such offer to Embassy, whereupon Embassy shall exercise its right of first refusal, if at all, within 30 days of receipt of such notice."
Mullen Automotive Inc.
EVT, Letter of Agreement
Joint-venture interest ROFR
One-Sided
2023
"EVT will not sell any of its ownership interests in MAEO to any third party without first offering Mullen a Right of First Refusal to purchase the said ownership interests."
DynaResource, Inc.
MK Metal Trading Mexico, Offtake Amendment
Commercial offtake (products) ROFR
One-Sided
2023
"For so long as the Contract remains in place, the Buyer shall receive a right of first refusal to purchase any concentrates or dore or other precious metal bearing products."
Negotiate
Holder Side
Define the trigger as a signed term sheet or bona fide written offer, and name every transfer you want covered.
Require complete notice of all material terms: price, structure, conditions, and closing date.
Set a matching period long enough to fund, and require the holder to match all material terms, with a cash-equivalent provision for non-cash offers.
Make the right run with the interest and survive a change of control if you want it to bind successors.
Seller Side
Carve out transfers to affiliates, family trusts, and estate-planning vehicles so ordinary transfers do not trigger the right.
Keep the matching period short so a pending sale is not stalled.
Consider a right of first offer instead, which sets a price floor while doing less to chill third-party bids.
Add a clean waiver mechanism so a passed right does not cloud the closing.
Red Flags
"Intent to sell," which invites disputes over whether the right was activated.
A matching period too short to arrange financing, which can defeat the holder's right in practice.
No definition of "bona fide offer," which lets a seller structure an affiliate transfer around the clause.
Silence on assignability and change of control, which defaults the right to non-assignable and leaves successor treatment unclear.
A real-property ROFR that is not in writing, which the Statute of Frauds makes unenforceable.
FAQs
This content is for informational purposes only and does not constitute legal advice.
