🚀 Medial just raised $500k in Pre-Series A. Tap to read the announcement. 🎉

Download App

Home

Switch theme

Blog . Feedback . Privacy
Community Guidelines

Back to feeds

Saksham
•

Bebyond • 3m

ROFR vs ROFO When structuring investment agreements, the Right of First Refusal (ROFR) and the Right of First Offer (ROFO) are two important clauses that can shape ownership transfers. Let’s explore how these rights work and their implications for both companies and investors. For Investors: Right of First Refusal (ROFR) ROFR allows investors to match any third-party offer a shareholder receives before the sale can proceed. This gives investors the power to keep shares within existing shareholders and maintain their influence in the company. It ensures that an investor has control over who enters the shareholder pool and can protect their stake by matching any outside offer. It’s a safety net to avoid dilution of control. Right of First Offer (ROFO) With ROFO, if a shareholder wants to sell, they must first offer their shares to existing shareholders before approaching outside buyers. However, the seller is not bound to accept the existing shareholders' offer if it's lower than expected. It allows investors to buy shares before they hit the open market but offers less certainty than ROFR since the seller can still pursue third-party offers. For Companies: Right of First Refusal (ROFR) ROFR gives the company more control over who holds equity, ensuring existing shareholders can match outside offers. However, it can deter potential third-party buyers, as they may not want to invest time and resources in a deal that might be matched. While it offers protection, ROFR can slow down the sale process and make external negotiations more complex, which might affect the company’s growth or strategic moves. Right of First Offer (ROFO) ROFO helps simplify the process by giving existing shareholders an early opportunity to buy shares. It also creates a competitive atmosphere, allowing shareholders to make a first move without immediately locking the seller into an outside offer. For the company, ROFO allows flexibility in ownership transitions without discouraging third-party buyers, as it doesn’t bind the seller to internal offers. Both ROFR and ROFO serve to protect existing shareholders but in different ways. ROFR is more restrictive, offering greater protection but potentially slowing down sales, while ROFO is less rigid and offers more flexibility for both parties. Choosing the right clause depends on balancing investor security and the company’s need for smooth transactions.

0 replies8 likes

Recommendations from Medial

Saksham
•

Bebyond • 2m

Transfer Rights Clauses in SHAs from an Investor’s Perspective!! When investing in startups, a well-drafted Shareholders Agreement (SHA) isn’t just a formality, it’s the foundation that protects their financial interests and ensures strategic contro

0 replies3 likes

Rohan Saha

Stealth • 9m

Imagine a predicament. You are at a job interview, and your employer gives you two offers to choose from. The first option offers an in-hand salary of ₹30,000. The second offer is a salary of ₹20,000 with a generous ESOP. Which option will you choo

9 replies14 likes

Abhijit Jha

Stealth • 8m

What is FPO? FPO abbreviated as Follow-on Public Offer is a process in which an existing company listed on the stock exchange issue new shares to the existing shareholders or to the new investors. It is different from an IPO where the company issue

2 replies6 likes

AjayEdupuganti

Stealth • 5m

For all those who are travelling via trains.. You can order food from swiggy which offer way more options from top restaurants than the existing irctc e catering, railfood etc

6 replies11 likes

Rajan Paswan

Stealth • 7m

As a founder, your startup is your baby. But what about when that Golden Exit opportunity appears? Drag-Along Rights in your Shareholder Agreement(SHA) are crucial for ensuring a smooth acquisition process. What are Drag-Along Rights? They empower

2 replies6 likes

Vivek Sharma

Stealth • 2m

Zoho Joins ONDC With Seller App Vikra, Launches Low-Code Platform Zoho IoT - Vikra is a seller app that facilitates the onboarding of businesses onto the ONDC, while Zoho IoT enables companies to build and deploy custom IoT solutions. - Vikra also

0 replies2 likes

Arcane

Stealth • 5m

Man the pace of AI is wild! 🤯 Over 15 BILLION images were created by AI in just ONE YEAR! (2022-2023) That's more photos than humans took in the ENTIRE first 150 years of photography! ALSO, This is more than ALL the photos on Shutterstock and a T

5 replies12 likes

Arjun Anil

Stealth • 8m

Hi I am building an app for local business to market there offer , increase there sales using in app marketing and customer retention using members ship and points. One stop solution for shops to increase profit and for consumer to find right offers

22 replies7 likes

Inactive

Stealth • 5m

Meta has released Llama 3.1, the first frontier-level open source AI model, with features such as expanded context length to 128K, support for eight languages, and the introduction of Llama 3.1 405B. The model offers flexibility and control, enabli

0 replies9 likes

Karan Kumar

Stealth • 5m

How fast business can pivot the existing service they are using to the one new startup or a business offers. Have you guys made any sales to a business who was already using the service from another vendor or company. Or how will you pursue it.

1 replies5 likes

Top Users