Secondary
How ROFR works in a private company
A right of first refusal (ROFR) means a shareholder who wants to sell must first offer the shares, on the same terms, to whoever holds the right — usually the company, then existing shareholders. Only if the right is not exercised within the notice period can the sale to the outside buyer proceed. The precise mechanics are set by the articles and the shareholders' agreement.
Prepared by Perseids · Published · Updated
The typical sequence
- 1The seller finds a buyer and agrees price and terms.
- 2The seller serves a transfer notice on the company setting out those terms.
- 3The company exercises, declines, or passes the right on to existing shareholders.
- 4Shareholders with the right may take up their allocation, often pro rata, within a fixed window.
- 5Any shares not taken up may be sold to the original buyer on terms no more favourable than those notified.
- 6The transfer is approved and the register is updated.
Related rights you will often see alongside it
| Right | Effect |
|---|---|
| ROFR | Existing parties may buy before an outsider |
| Right of first offer | Seller must offer to existing parties before marketing the shares |
| Co-sale / tag-along | Other holders may join the sale on the same terms |
| Board approval of transfers | Transfer is void without consent |
| Drag-along | Majority can compel minority to sell in a qualifying exit |
ROFR
- Effect
- Existing parties may buy before an outsider
Right of first offer
- Effect
- Seller must offer to existing parties before marketing the shares
Co-sale / tag-along
- Effect
- Other holders may join the sale on the same terms
Board approval of transfers
- Effect
- Transfer is void without consent
Drag-along
- Effect
- Majority can compel minority to sell in a qualifying exit
Why ROFR slows secondaries down
Each notice period is real elapsed time, and the process must be run correctly or the transfer can be challenged. This is why an organised secondary window — where eligibility, notices and approvals are handled as one process rather than ad hoc — completes far faster than a series of individual private sales.
Prepared by Perseids for general information. It is not legal, tax or investment advice — confirm your specific situation with your advisers.
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