Maryland 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 Maryland Right of First Refusal Clause for Shareholders' Agreement is an essential provision that governs the transfer of shares in a Maryland corporation. This clause grants existing shareholders the primary opportunity to purchase shares before they are offered to third parties, ensuring that the ownership remains within the current shareholder base. In Maryland, there are different types of Right of First Refusal Clauses that can be included in a Shareholders' Agreement. These include the Preemptive Right of First Refusal, Right of First Offer, and the Co-Sale Right of First Refusal. The Preemptive Right of First Refusal empowers existing shareholders to purchase a pro rata portion of any new shares issued by the corporation. This allows shareholders to maintain their current ownership percentage and protects them from potential dilution caused by the issuance of additional shares. The Right of First Offer grants existing shareholders the initial opportunity to purchase shares that a shareholder intends to sell. The shareholder looking to sell must first provide a formal offer to the other shareholders, who then have the right to accept or decline the offer. This clause ensures that shareholders have an opportunity to maintain their ownership interests by giving them the first chance to acquire any offered shares. The Co-Sale Right of First Refusal, also known as the Tag-Along Right, gives minority shareholders the right to join in the sale and transfer of shares when a majority shareholder intends to sell their stake to a third party. The minority shareholder can then sell their shares on the same terms and conditions as offered to the majority shareholder. This clause protects minority shareholders from being left behind during a significant ownership change and enables them to maintain their proportional ownership. It is important to note that each type of Maryland Right of First Refusal Clause may have specific provisions and nuances, which can vary depending on the shareholders' agreement and the specific requirements of the corporation. These clauses are often included to protect the interests of shareholders and maintain stability within the ownership structure of a Maryland corporation.

The Maryland Right of First Refusal Clause for Shareholders' Agreement is an essential provision that governs the transfer of shares in a Maryland corporation. This clause grants existing shareholders the primary opportunity to purchase shares before they are offered to third parties, ensuring that the ownership remains within the current shareholder base. In Maryland, there are different types of Right of First Refusal Clauses that can be included in a Shareholders' Agreement. These include the Preemptive Right of First Refusal, Right of First Offer, and the Co-Sale Right of First Refusal. The Preemptive Right of First Refusal empowers existing shareholders to purchase a pro rata portion of any new shares issued by the corporation. This allows shareholders to maintain their current ownership percentage and protects them from potential dilution caused by the issuance of additional shares. The Right of First Offer grants existing shareholders the initial opportunity to purchase shares that a shareholder intends to sell. The shareholder looking to sell must first provide a formal offer to the other shareholders, who then have the right to accept or decline the offer. This clause ensures that shareholders have an opportunity to maintain their ownership interests by giving them the first chance to acquire any offered shares. The Co-Sale Right of First Refusal, also known as the Tag-Along Right, gives minority shareholders the right to join in the sale and transfer of shares when a majority shareholder intends to sell their stake to a third party. The minority shareholder can then sell their shares on the same terms and conditions as offered to the majority shareholder. This clause protects minority shareholders from being left behind during a significant ownership change and enables them to maintain their proportional ownership. It is important to note that each type of Maryland Right of First Refusal Clause may have specific provisions and nuances, which can vary depending on the shareholders' agreement and the specific requirements of the corporation. These clauses are often included to protect the interests of shareholders and maintain stability within the ownership structure of a Maryland corporation.