The right of first refusal can generally be found in three distinct cases, particularly in the following clauses that might be included in a purchase and sale agreement: 1) the voluntary withdrawal of a shareholder; 2) the voluntary withdrawal of a shareholder following receipt of a bona fide third-party offer; 3) a tag-along clause following a bona fide third-party , also known as the “Piggy Back” clause.
In the case of a voluntary withdrawal, if a shareholder wishes to sell their shares but no shareholder has accepted the offer, or if not all of the offered shares have been purchased, the offeror will be free to offer them for sale to anyone at any price the offeror chooses. However, if the price then requested by the offeror is lower than that offered in the or on more favorable terms, the offeror must promptly notify his or her co-shareholders, who will have a right of first refusal for said shares at that lower price or under those more favorable terms.
In the event of a voluntary withdrawal by a shareholder following receipt of a bona fide external offer from a third party with whom they are dealing remotely, if that shareholder wishes to accept the offer, they must then offer to sell to their co-shareholder(s) the shares covered by that offer at the same price, terms, and conditions as those set forth in the external offer, by sending him or them a written notice to that effect along with a copy of the offer received, and grant him or them a right of first refusal (i.e., a priority right) to purchase the shares covered by that offer; consequently, the co-shareholder(s) must, within the specified time limit, notify the beneficiary of the offer and the offeror whether or not they wish to acquire the shares covered by that external offer.
In the case of a drag-along clause following a bona fide third-party offer, if the shares subject to a bona fide third-party offer represent control of the corporation and if the offeror does not require the minority shareholder(s) to also sell all of their shares, the minority shareholder(s) have, in addition to their right of first refusal already mentioned, the right to require, by written notice sent within the period for exercising their right of first refusal, that their shares be sold to the offeror at the same price, terms, and conditions as those provided for the beneficiary of the offer. However, if the offeror requests that the minority shareholder(s) also sell all of their shares, such shareholder(s), in addition to their right of first refusal already mentioned, hereby agree immediately, but only to the extent that they decide not to exercise their right of right of first refusal, to sell all of their shares to the offeror, provided that such shares are sold to the offeror at the same prices, terms, and conditions as those provided for the beneficiary of the offer.