ROFR/co-sale agreement is the investors’ rights document that bundles transfer restrictions: right of first refusal, company consent, and co-sale (tag-along) when insiders sell shares.

How it works

When a founder receives a third-party bid for common stock, the agreement typically requires:

1. Notice to company and major investors with full terms.
2. ROFR — company and/or investors may purchase on the same terms within a set window.
3. Co-sale — if ROFR is waived or not fully exercised, investors may sell a pro rata portion of their shares in the same transaction.

Company right of first refusal often sits before investor ROFR in the waterfall. Board approval may be required for any transfer. Exceptions cover estate planning, affiliates, and approved tender offers.

These mechanics appear in the Investors’ Rights Agreement alongside information rights and registration rights.

Why it matters

• Founders: Plan months ahead for secondary liquidity; waivers are negotiable in tender programs but not ad hoc sales.
• Investors: Standard control package — ensures cap table quality and optional participation in insider exits.

Common mistake

Assuming a friendly buyer can close quickly without running the full ROFR/co-sale sequence. Skipping steps can void the transfer and expose buyers to rescission risk.

Related ideas

See also ROFR, ROFO, drag along, and cap table.