Illinois 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 Illinois Right of First Refusal Clause for Shareholders' Agreement is a legal provision that allows existing shareholders of a company to exercise their right to purchase additional shares of the company before those shares are offered to third parties or on the open market. This clause is commonly included in shareholders' agreements to ensure that existing shareholders have the opportunity to maintain their proportional ownership and protect their investment. The Right of First Refusal Clause in Illinois provides shareholders with the first opportunity to purchase any newly issued shares of the company or shares owned by another shareholder who wishes to sell. It essentially grants them priority over external investors or potential buyers. The purpose of this clause is to maintain stability and control within the company by preventing unwanted or unqualified shareholders from gaining ownership. There are two different types of Right of First Refusal Clauses commonly found in Illinois Shareholders' Agreements: 1. Basic Right of First Refusal: This clause grants existing shareholders the right to purchase shares at the same price and under the same terms and conditions as those offered by a third party. If a shareholder intends to sell their shares, they must first offer them to existing shareholders who then have the option to either exercise their right and purchase the shares or decline, allowing the selling shareholder to proceed with the sale to the third party. 2. Right of First Offer: This clause functions similarly to the basic Right of First Refusal, but with a slight difference. Instead of the selling shareholder setting the terms and conditions, the company itself determines the price, terms, and conditions at which the shares will be offered to existing shareholders. This allows the company to maintain control over the offering and ensures consistency in valuation methods. The Illinois Right of First Refusal Clause for Shareholders' Agreement is an important tool for protecting existing shareholders' ownership interests and maintaining stability within a company. By providing them with the opportunity to maintain their proportional ownership and to prevent the dilution of their shares, this clause ensures that existing shareholders have a fair chance to participate in future investments and maintain control over the company's ownership structure.

The Illinois Right of First Refusal Clause for Shareholders' Agreement is a legal provision that allows existing shareholders of a company to exercise their right to purchase additional shares of the company before those shares are offered to third parties or on the open market. This clause is commonly included in shareholders' agreements to ensure that existing shareholders have the opportunity to maintain their proportional ownership and protect their investment. The Right of First Refusal Clause in Illinois provides shareholders with the first opportunity to purchase any newly issued shares of the company or shares owned by another shareholder who wishes to sell. It essentially grants them priority over external investors or potential buyers. The purpose of this clause is to maintain stability and control within the company by preventing unwanted or unqualified shareholders from gaining ownership. There are two different types of Right of First Refusal Clauses commonly found in Illinois Shareholders' Agreements: 1. Basic Right of First Refusal: This clause grants existing shareholders the right to purchase shares at the same price and under the same terms and conditions as those offered by a third party. If a shareholder intends to sell their shares, they must first offer them to existing shareholders who then have the option to either exercise their right and purchase the shares or decline, allowing the selling shareholder to proceed with the sale to the third party. 2. Right of First Offer: This clause functions similarly to the basic Right of First Refusal, but with a slight difference. Instead of the selling shareholder setting the terms and conditions, the company itself determines the price, terms, and conditions at which the shares will be offered to existing shareholders. This allows the company to maintain control over the offering and ensures consistency in valuation methods. The Illinois Right of First Refusal Clause for Shareholders' Agreement is an important tool for protecting existing shareholders' ownership interests and maintaining stability within a company. By providing them with the opportunity to maintain their proportional ownership and to prevent the dilution of their shares, this clause ensures that existing shareholders have a fair chance to participate in future investments and maintain control over the company's ownership structure.