South Dakota 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 South Dakota Right of First Refusal Clause for Shareholders' Agreement is a provision that grants existing shareholders the first opportunity to purchase additional shares before they can be offered to any third party. This important clause ensures that existing shareholders have a chance to maintain their proportionate ownership in the company and protects their investment. In South Dakota, there are primarily two types of Right of First Refusal Clauses for Shareholders' Agreements: 1. Simple Right of First Refusal: This type of clause grants existing shareholders the right to purchase new shares in proportion to their existing holdings. If a shareholder decides to sell their shares, they must first offer them to the other shareholders at a price and on terms as specified in the agreement. The other shareholders then have the option to accept or decline the offer. If declined, the shareholder is free to sell the shares to a third party. 2. Right of First Offer: This variation of the clause operates slightly differently. Instead of the selling shareholder setting a specific price and terms, they must first notify the other shareholders of their intention to sell. The other shareholders then have the opportunity to make an offer to purchase the shares at a price and on terms they determine. If no offers are made, or if the offers made are rejected by the selling shareholder, only then can the shares be offered to third parties. Both types of Right of First Refusal Clauses aim to maintain the stability and integrity of the company's ownership structure. By providing existing shareholders with the first opportunity to acquire additional shares, these clauses ensure that control remains within the hands of those already invested in the company. This can prevent unwanted dilution of ownership and maintain harmony among shareholders. It is important for shareholders in South Dakota to carefully consider the inclusion of a Right of First Refusal Clause in their Shareholders' Agreement. This clause can protect their interests and ensure a fair process for acquiring additional shares. Seeking professional legal advice is recommended to draft an agreement that accurately reflects the shareholders' intentions and complies with South Dakota laws and regulations.

The South Dakota Right of First Refusal Clause for Shareholders' Agreement is a provision that grants existing shareholders the first opportunity to purchase additional shares before they can be offered to any third party. This important clause ensures that existing shareholders have a chance to maintain their proportionate ownership in the company and protects their investment. In South Dakota, there are primarily two types of Right of First Refusal Clauses for Shareholders' Agreements: 1. Simple Right of First Refusal: This type of clause grants existing shareholders the right to purchase new shares in proportion to their existing holdings. If a shareholder decides to sell their shares, they must first offer them to the other shareholders at a price and on terms as specified in the agreement. The other shareholders then have the option to accept or decline the offer. If declined, the shareholder is free to sell the shares to a third party. 2. Right of First Offer: This variation of the clause operates slightly differently. Instead of the selling shareholder setting a specific price and terms, they must first notify the other shareholders of their intention to sell. The other shareholders then have the opportunity to make an offer to purchase the shares at a price and on terms they determine. If no offers are made, or if the offers made are rejected by the selling shareholder, only then can the shares be offered to third parties. Both types of Right of First Refusal Clauses aim to maintain the stability and integrity of the company's ownership structure. By providing existing shareholders with the first opportunity to acquire additional shares, these clauses ensure that control remains within the hands of those already invested in the company. This can prevent unwanted dilution of ownership and maintain harmony among shareholders. It is important for shareholders in South Dakota to carefully consider the inclusion of a Right of First Refusal Clause in their Shareholders' Agreement. This clause can protect their interests and ensure a fair process for acquiring additional shares. Seeking professional legal advice is recommended to draft an agreement that accurately reflects the shareholders' intentions and complies with South Dakota laws and regulations.