Right of First Refusal (ROFR)

Also known as: ROFR, Pre-emption on Transfer, Right of First Offer, ROFO, Önalım Hakkı, Ön Alım Hakkı

In short

The right of other shareholders, if a shareholder wishes to sell its shares to a third party, to buy those shares first at the same price and on the same terms.

A right of first refusal gives the other shareholders, if a shareholder wishes to sell its shares, the opportunity to buy them first at the price and on the terms offered by a third party. Shareholders can thereby prevent an unwanted person from joining the company.

How It Works

The selling shareholder notifies the other shareholders of the third party’s offer and terms.
The other shareholders state within the set period whether they will exercise the right.
If exercised, the shares are sold to them on the same terms; if not, the seller may sell to the third party within a set period and on terms no better than those notified.

The agreement should also regulate how the shares are allocated if several shareholders exercise the right and whether partial exercise is allowed.

Right of First Offer (ROFO)

Under a right of first offer, the seller must offer the shares to the other shareholders before offering them to a third party. This method binds the seller before it looks for a buyer and is more flexible for the seller; a right of first refusal can make finding a buyer harder, because the third party knows its offer may be taken up by the other shareholders.

Position under Turkish Law

Limited liability company: The articles may provide for rights of first offer, first refusal, repurchase and purchase (TCC Art. 577).
Joint stock company: Since the articles may only deviate from the Code where expressly permitted (TCC Art. 340), the right of first refusal is usually regulated in the shareholders’ agreement. Making the transfer of unlisted registered shares subject to approval in the articles (TCC Art. 493) supports this right.

The right of first refusal is usually regulated together with the tag-along right and the drag-along right. Priority over newly issued shares is the pre-emptive right.

Frequently Asked Questions

What is the difference between a right of first refusal and a right of first offer?

Under a right of first refusal, the seller first agrees terms with a third party and the other shareholders then decide whether to buy on the same terms. Under a right of first offer, the seller must offer the shares to the other shareholders before approaching a third party; if they decline, the seller may sell to a third party on terms no better than those offered.

Can a right of first refusal be written into the articles of a joint stock company?

Because share transfers in a joint stock company may only be restricted by the articles to the extent permitted by the Code, including a right of first refusal in the articles is debated. In practice, the right is regulated in the shareholders' agreement and supported by the transfer restriction in the articles.

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