California Right of First Refusal Clause for Shareholders' Agreement

• Category: Corporations - Shareholders and Stock
• State: Multi-State
• Control #: US-01770
• Format: Word; Rich Text

Description

This is a model clause for a shareholder's agreement addressing Right of First Refusal. If a shareholder wishes to sell shares, the company will be given notice and has the right to buy the shares during a certain limited time period. Adapt to fit your circumstances. The California Right of First Refusal Clause for Shareholders' Agreements is an important provision that governs the sale of shares in a California corporation. This clause grants certain shareholders the right to purchase any shares that another shareholder intends to sell before the shares are offered to third parties. This helps maintain stability and control within the corporation by giving existing shareholders the opportunity to retain their proportionate ownership. The primary purpose of the Right of First Refusal Clause is to protect the interests of existing shareholders by preventing unwanted or potentially disruptive outside parties from becoming shareholders. It ensures that existing shareholders have the first opportunity to acquire additional shares and maintain their influence and control over the corporation's affairs. There are different types of California Right of First Refusal Clauses for Shareholders' Agreements, including: 1. General Right of First Refusal: This clause grants existing shareholders the right to purchase any shares that another shareholder intends to sell at the offered price or a price determined through a specified formula. If the existing shareholders choose not to exercise this right within a specified timeframe, the selling shareholder can then offer the shares to third parties. 2. Co-Sale Right of First Refusal: This variation allows a group of shareholders, often referred to as "majority shareholders," to collectively exercise their right of first refusal when another shareholder proposes to sell their shares. The selling shareholder can only proceed with the sale if both the co-sale group and the corporation decline to exercise their rights. 3. Specific Shareholder Right of First Refusal: In some cases, a shareholders' agreement may grant only specific shareholders the right of first refusal. This selective approach allows certain key shareholders, such as founders or influential investors, to have the first chance to acquire additional shares. The California Right of First Refusal Clause serves as an essential tool in safeguarding existing shareholders' interests and preserving the stability and control of a corporation. It ensures that share transfers occur in an orderly and controlled manner, giving shareholders the opportunity to retain control and maintain their proportional ownership in the company.

The California Right of First Refusal Clause for Shareholders' Agreements is an important provision that governs the sale of shares in a California corporation. This clause grants certain shareholders the right to purchase any shares that another shareholder intends to sell before the shares are offered to third parties. This helps maintain stability and control within the corporation by giving existing shareholders the opportunity to retain their proportionate ownership. The primary purpose of the Right of First Refusal Clause is to protect the interests of existing shareholders by preventing unwanted or potentially disruptive outside parties from becoming shareholders. It ensures that existing shareholders have the first opportunity to acquire additional shares and maintain their influence and control over the corporation's affairs. There are different types of California Right of First Refusal Clauses for Shareholders' Agreements, including: 1. General Right of First Refusal: This clause grants existing shareholders the right to purchase any shares that another shareholder intends to sell at the offered price or a price determined through a specified formula. If the existing shareholders choose not to exercise this right within a specified timeframe, the selling shareholder can then offer the shares to third parties. 2. Co-Sale Right of First Refusal: This variation allows a group of shareholders, often referred to as "majority shareholders," to collectively exercise their right of first refusal when another shareholder proposes to sell their shares. The selling shareholder can only proceed with the sale if both the co-sale group and the corporation decline to exercise their rights. 3. Specific Shareholder Right of First Refusal: In some cases, a shareholders' agreement may grant only specific shareholders the right of first refusal. This selective approach allows certain key shareholders, such as founders or influential investors, to have the first chance to acquire additional shares. The California Right of First Refusal Clause serves as an essential tool in safeguarding existing shareholders' interests and preserving the stability and control of a corporation. It ensures that share transfers occur in an orderly and controlled manner, giving shareholders the opportunity to retain control and maintain their proportional ownership in the company.