c) transmission to third parties. If none of the shares put up for sale are offered for sale by the other shareholders, the selling shareholder may transfer the remaining shares to a person or person, but only within 90 days of the seller`s notification date. However, the selling shareholder may not sell or transfer any of the shares for sale at a lower price or on more advantageous terms that are more favourable to the buyer or assignee than those indicated in the seller`s communication. At the end of the 90-day period, the procedure for the first offer to the company and other shareholders will apply again. If only a portion of the shares for sale is acquired by the other shareholders and the other purchaser chooses not to acquire the other shares, the selling shareholder may decide not to sell shares. As a result, a ROFO mechanism often favours selling shareholders. The operation of a ROFR depends entirely on what was agreed in the shareholders` pact. There are many things that can vary, for example, existing shareholders can get the right to buy on preferential terms (such as price), only a few shareholders may have the right, the company may also have the right, or the right can only exist in certain circumstances. If the current shareholders think that the promising buyer is offering a much higher price than the value of the business, then they cannot make use of the right of the first refusal, but the buyer knows that he has paid a much higher price than other (more competent) owners would. The right to first refusal is a promise that gives a person priority to enter into a purchase or transfer contract. For example, a shareholder of a company often has the right to refuse to buy shares from other shareholders of the company. Of course, only if this is stipulated in the company`s statutes or in the shareholders` pact.
In this way, a company`s shareholders can protect themselves against the registration of persons outside the shareholder register. The right of pre-emption is often accompanied by a number of conditions that must be accepted in order to continue the purchase. On the other hand, a selling shareholder, if he has an insight into the value of the company, should be better positioned to evaluate his investment. Therefore, the tendering process for the sale of the shareholder would not make sense when determining value. Instead, a selling shareholder may want to make a sale as quickly and with as low a transaction cost as possible. A ROFO offers this possibility. A ROFO allows a selling shareholder to immediately make an offer to shareholders who do not sell, instead of spending the time first soliciting an offer from a third party. In addition, where a third-party buyer knows that the shares are subject to an RFR, the third-party buyer may require that he be reimbursed for the duty of care and related costs if the transaction is not concluded.
The uncertainty of closure in the case of a ROFR may also lead the third party to propose a lower price. The rights of the first refusal are usually demanded by individuals or companies who want to see how a business or opportunity will end. The rights holder may prefer to commit at a later date rather than make the effort and commitment immediately, and a right of first refusal allows him to do so. This brief article explains how the granting of a subscription right under a shareholders` pact gives existing owners additional control over the arrival of new owners. In the business world, the rights of the first rejection are often seen in joint venture situations. Partners in a joint venture generally have the right to refuse to buy shares of other partners who leave the company.