---
title: "What Is Right of First Refusal (ROFR)?"
term: "Right of First Refusal (ROFR)"
description: "A right of first refusal (ROFR) lets a designated party match a bona fide third-party offer to buy shares — the seller cannot sell on better terms without offering the ROFR holder the same deal."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["deal-terms"]
source: https://venturecapitaltracker.com/glossary/rofr
---

# What Is Right of First Refusal (ROFR)?

> A right of first refusal (ROFR) lets a designated party match a bona fide third-party offer to buy shares — the seller cannot sell on better terms without offering the ROFR holder the same deal.

**Right of first refusal (ROFR)** is the right to purchase shares on the same terms as a third-party buyer before the seller completes an outside transfer.

### How it works

An employee receives a $5/share offer for common stock. Shareholder agreement requires notifying the company and major investors. Each ROFR holder has a set period — often 30 days — to match.

If the company exercises ROFR, it buys the shares (sometimes reallocating among investors). If all pass, the employee closes with the outside buyer at no better terms than disclosed.

ROFR stacks with **co-sale (tag-along)** rights: when founders sell, investors may join the transaction pro rata. Transfer restrictions also block gifts or pledges without board consent.

Company ROFR protects against unknown shareholders; investor ROFR protects pro rata and strategic interests.

### Why it matters

- **Founders:** Secondary liquidity often needs board and ROFR waivers; start the process before you need cash.
- **Investors:** ROFR is standard control mechanics — exercise decisions affect ownership and competitor blocking.

### Common mistake

Sharing a term sheet with a buyer before giving ROFR notice. Many agreements void sales if process order is wrong, restarting the clock.

### Related ideas

See also [ROFO](/glossary/rofo), [ROFR/co-sale agreement](/glossary/rofr-co-sale-agreement), [co-sale](/glossary/co-sale), and [cap table](/glossary/cap-table).

## FAQ

### What is ROFR in simple terms?

ROFR means if you get a real offer to buy your shares, you must give the ROFR holder — usually the company or investors — a chance to buy them on the same terms. If they match, they buy; if not, you can sell to the outsider.

### Why does ROFR matter?

For founders and employees, ROFR adds steps and timing risk to any share sale. For investors, it controls who joins the cap table and prevents unwanted competitors from accumulating stock.


---
Source: https://venturecapitaltracker.com/glossary/rofr