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What is the Right of First Refusal (ROFR)?

Highlighted from a real earnings story. Explained by Clicked.

Used in a sentence

Before selling your shares to an outside buyer, you must honor the company’s right of first refusal.

The reader highlighted one clause — on the page or in a PDF. Clicked explained the legal term “right of first refusal” in plain language:

Explained in three depths

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Overview

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A right of first refusal means that before you can sell to an outside buyer, you must offer the same deal, at the same price and terms, to the rights holder first. They can match it and take it, or pass and let your sale go through.

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Detail

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The mechanics: the right triggers when you have a genuine third-party offer in hand. The holder, often the company or its investors in a startup, or a tenant in real estate, then gets a set window to match. Match, and they take the deal at the outsider's price; pass, and you're free to close with the outsider on those exact terms. It's worth distinguishing from a right of first offer, where the holder gets to bid before you ever shop the asset around. ROFR protects the holder's control over who gets in, which is why companies use it to keep shares out of unknown hands. But it has a known side effect: it chills outside buyers, because serious bidders hesitate to spend weeks on diligence knowing an insider can take the finished deal at the last step, which can quietly lower the price your asset fetches. Deadlines are therefore essential, since a matching window with no clock can trap a sale indefinitely.

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Analogy

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Selling your vintage car when your brother holds written first dibs. You find a buyer at $20,000, and before that buyer gets the keys, your brother can take the car at exactly $20,000. He can't block the sale; he's allowed to be the sale, at the price the market just proved.

AI explanations may contain errors · Not professional advice

Same facts, different vibe — Slang mode 😎

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Overview

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ROFR is legally binding dibs. Find your buyer, agree on a price, and then the rights holder steps in and can take the deal at exactly that price. You're selling either way, and the open question is to whom. 😎

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Detail

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How the game plays: you need a real offer in hand, and "bona fide" is doing heavy lifting there, since no fake uncles may bid the price up. The holder gets a window to match or pass. Startup version: you try to sell your shares, and the company or its investors can swoop on the finished deal. The side effect nobody advertises is that serious buyers hate being stalking horses, because why grind through weeks of diligence when an insider can snatch the deal at the finish line? Fewer real bidders, softer price, and honestly that chill is part of why the right exists. Last thing: no deadline, no deal, since an ROFR without a clock is a sale stuck in purgatory. 😎

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Analogy

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It's the friend who declared that if you ever sell the PS5, they get first shot. You find a buyer at $300, and the friend can hit match and it's theirs at $300, or wave it through. Your buyer was mostly a price-discovery device.

AI explanations may contain errors · Not professional advice

Formal definition — The same term, explained the usual way

A right of first refusal is a contractual preemption right obligating a prospective seller, upon receipt of a bona fide third-party offer, to present the offer to the rights holder, who may acquire the asset on identical terms within a prescribed period. The mechanism is distinguished from a right of first offer, which precedes market solicitation. ROFRs are common in shareholder agreements and leases; principal criticisms include their dampening effect on third-party bidding and transaction liquidity.

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