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This is 100% standard for private companies, particularly startups. The company often prefers to buy back the equity rather than have it go to a disconnected t
by doublerebel 7y ago
This is 100% standard for private companies, particularly startups. The company often prefers to buy back the equity rather than have it go to a disconnected third party. This First Right Of Refusal is often also explicitly outlined in the shareholders/purchase agreement. The largest shareholders with voting rights are who create this agreement.
It's not dirty: it keeps incentives aligned because the shareholders have common goals, and the terms are stated clearly upfront.
- H8crilA 7y agoRight of first refusal makes sense, it still exists in Europe for publicly traded companies. Shareholders of companies that issue new equity can sell their rights to other investors, or exercise those rights. But what we have here is not only that but also a prohibition on sale to an outsider. So not only "we can intercept the sale at the same price you offered to someone else" but also "we can block that sale even if we don't want to participate in it".