Definition of right of first refusal


Shares held by an employee are typically subject to a right of first refusal (ROFR) in favor of the company, meaning the employee can’t sell their shares to a third party without offering to sell their shares to the company first.

Related terms

More from The Holloway Guide to Equity Compensation

Table: Comparing Taxes on Types of Equity Compensation β€Ί Plans and Scenarios β€Ί Can You Sell Private Stock?

​caution​ Private sales generally require the agreement and cooperation of the company, for both contractual and practical reasons. While those who hold private stock may hope or expect they need only find a willing buyer, in practice secondary sales only work out in a few situations.