Secondary transactions and right of first refusal (ROFR)

By Unicorn Private Research. Published and last updated 26 September 2026.

What is a ROFR? A right of first refusal lets a private company, and sometimes its main investors, buy the shares a holder has agreed to sell, at exactly the same price and on the same terms, before the outside buyer can. If they use it, the buyer walks away with nothing. The clause sits in the company's bylaws or shareholder agreements and gives the company a fixed window to decide, so no secondary sale of private shares closes until that window has run out.

In a secondary transaction an existing shareholder sells to a new buyer, and the company sees none of the money. In a private company this is almost never a simple trade. The company and its investors hold contractual rights over every transfer.

How a typical secondary sale works

1. Find a seller who holds shares and is allowed to sell them: an early employee, a founder, an early fund.
2. Agree on price and terms. The anchor is usually the last funding round or recent secondary trades.
3. Notify the company. It reviews the transfer and may exercise its right of first refusal.
4. Get board approval where needed, and confirm that other holders' co-sale rights were respected or waived.
5. Sign the transfer documents and pay.
6. Update the company's cap table so the buyer is on record as the holder.

What is a right of first refusal?

A ROFR gives the company, and sometimes its major investors, the right to buy the shares on exactly the terms of the proposed sale. If they use it, the outside buyer gets nothing. It is one of the main reasons private deals slip, get repriced or fall apart.

Other restrictions worth checking

• Transfer approval by the board, or by a majority of preferred holders.
• Co-sale rights, which let other holders sell alongside the seller.
• Lock-up and market stand-off clauses that kick in around an IPO.
• Limits on who may hold the shares, including investor qualification rules.

Why execution decides the deal

Finding real sellers, negotiating terms and drafting the agreement each call for specific know-how. One mistake can void a transfer or leave the buyer with fewer rights than they paid for. That is why specialists run this market. Unicorn Club, the investor club of Unicorn Private, offers club deals in pre-IPO companies through a dedicated vehicle (SPV), for accredited and qualified investors, from 100,000 dollars.

Related guides

• Pre-IPO due diligence checklist
• SPV vs direct purchase vs fund in pre-IPO investing
• What is pre-IPO investing?
• Unicorn Club

Sources

1. Pre-IPO, Wikipedia
2. Informed Investor Advisory: Unicorns, NASAA