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ARTICLE · 11 JULY 2013

Pre-emption rights and rights of first refusal - first mover disadvantage?

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Rights of pre-emption and rights of refusal can be used in contracts to give one party broad rights to buy or sell.

AustraliaCorporate/Commercial Law
Kieren Parker
Kieren Parker

Rights of pre-emption and rights of refusal can be used in corporate and commercial contracts to give one party (preferred party) rights to buy or sell just about anything from the party granting the rights (grantor). In shareholders agreements for example, they are often used in favour of shareholders where one shareholder proposes to transfer its shares.

There is a danger in overlooking the exact nature of these kinds of rights. Subtle differences in approach can materially impact on the way in which the grantor is able to deal with an underlying asset or more generally conduct its business.

Taking the example of a shareholder intending to sell shares, pre-emption rights can be viewed as falling within one of the following three categories:

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