What it is: The right of first refusal (ROFR) is a contractual right that allows a party to enter into a transaction or purchase assets before being offered to others. It allows the holder of the right to match the terms and conditions of a proposed transaction and acquire the asset.
Why it is important: The right of first refusal provides protection and control to the holder, allowing them to participate in transactions and potentially acquire assets of interest. It ensures fairness, allows for strategic decision-making, and prevents unwanted dilution or transfer of ownership.
Formulas: No specific formulas are associated with the right of first refusal.
How to use it in the context of startups: Startups can include the right of first refusal clauses in agreements, such as shareholder agreements or investment agreements, to protect their interests and maintain control over critical transactions. By utilizing the right of first refusal, startups can have the opportunity to participate in transactions, maintain ownership percentages, and strategically manage their assets.