Washington 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 Washington Right of First Refusal Clause for Shareholders' Agreement is a significant provision that grants existing shareholders the opportunity to purchase shares before they are offered to third parties. This clause is typically included in a shareholders' agreement to protect the interests of current shareholders and maintain control over the ownership structure of a corporation. Under this clause, if a shareholder decides to sell their shares, they must first offer them to the existing shareholders at a pre-determined price or based on a valuation formula specified in the agreement. The purpose of this clause is to provide existing shareholders with the right to purchase the shares on the same terms and conditions as those offered by third parties. The inclusion of a Right of First Refusal Clause in a shareholders' agreement helps maintain stability and control within the corporation by ensuring that new shareholders are carefully selected and aligned with the strategic goals and values of the existing shareholders. It prevents the dilution of ownership and allows current shareholders to maintain their proportionate ownership stake. In Washington, there are two main types of Right of First Refusal Clauses for Shareholders' Agreements: the "Permitted Transfers" and "General" clauses. 1. Permitted Transfers Clause: This clause allows certain types of transfers without triggering the right of first refusal. It typically includes transfers to immediate family members, trusts, or other entities controlled by the shareholder. Permitted transfers are generally excluded from the right of first refusal requirement to provide shareholders with some flexibility while retaining control over transfers to outside parties. 2. General Right of First Refusal Clause: This clause applies to the majority of transfers and requires the selling shareholder to first offer the shares to existing shareholders. If the existing shareholders decline to purchase the shares within a specified timeframe, the selling shareholder can then proceed with selling them to a third party. The price and terms of the offer to the existing shareholders are usually based on fair market value or a predetermined valuation method. It is essential for shareholders to carefully consider the specifics of the Right of First Refusal Clause in their shareholders' agreement to ensure it aligns with their goals and intentions. Seeking legal counsel is recommended to draft a comprehensive clause that fits the unique circumstances and complies with Washington state laws and regulations.

The Washington Right of First Refusal Clause for Shareholders' Agreement is a significant provision that grants existing shareholders the opportunity to purchase shares before they are offered to third parties. This clause is typically included in a shareholders' agreement to protect the interests of current shareholders and maintain control over the ownership structure of a corporation. Under this clause, if a shareholder decides to sell their shares, they must first offer them to the existing shareholders at a pre-determined price or based on a valuation formula specified in the agreement. The purpose of this clause is to provide existing shareholders with the right to purchase the shares on the same terms and conditions as those offered by third parties. The inclusion of a Right of First Refusal Clause in a shareholders' agreement helps maintain stability and control within the corporation by ensuring that new shareholders are carefully selected and aligned with the strategic goals and values of the existing shareholders. It prevents the dilution of ownership and allows current shareholders to maintain their proportionate ownership stake. In Washington, there are two main types of Right of First Refusal Clauses for Shareholders' Agreements: the "Permitted Transfers" and "General" clauses. 1. Permitted Transfers Clause: This clause allows certain types of transfers without triggering the right of first refusal. It typically includes transfers to immediate family members, trusts, or other entities controlled by the shareholder. Permitted transfers are generally excluded from the right of first refusal requirement to provide shareholders with some flexibility while retaining control over transfers to outside parties. 2. General Right of First Refusal Clause: This clause applies to the majority of transfers and requires the selling shareholder to first offer the shares to existing shareholders. If the existing shareholders decline to purchase the shares within a specified timeframe, the selling shareholder can then proceed with selling them to a third party. The price and terms of the offer to the existing shareholders are usually based on fair market value or a predetermined valuation method. It is essential for shareholders to carefully consider the specifics of the Right of First Refusal Clause in their shareholders' agreement to ensure it aligns with their goals and intentions. Seeking legal counsel is recommended to draft a comprehensive clause that fits the unique circumstances and complies with Washington state laws and regulations.