Co-Sale Agreement

September 14, 2021

This weight continues to increase if he or she receives even more co-sale shares. If the investor receives the most shares of your company, that investor can replace all directors, partners, managers and other executives as often as they wish. Yet this is only the most pessimistic scenario. ROFR/Co-sale requires a founder to inform the board of directors and investors in writing of possible transfers, which gives the company and investors time to assess whether they wish to buy the shares (or participate in the “co-sale”). I have never heard that a co-sale right is actually used, although I know that many companies remind former founders of their ROFR obligations. One of the disadvantages of covente rights is that the buyers of these shares (in our example company A) may have a very large majority stake in the acquired company, which can worry the remaining shareholders and mean that a new board of directors or management is on the way. The ROFR/Co-Sale contract rarely receives more than superficial feedback as part of a typical company financing. In the event that [__________] proposes to transfer shares to the company, the company has the right to pre-empt the shares under the same conditions as the proposed transfer. If the company does not exercise its right of pre-emption, the owners of Preferred have a right of pre-emption (pro rata among the holders of Preferred) with regard to the proposed transfer. [The right to purchase unjustifiable shares is redistributed on a pro rata basis among the other legitimate holders of Preferred.] Insofar as the pre-emption rights are not exercised, preferred holders have the right to participate in proportion to the proposed transfer (as for the buyer and the owners of Preferred). Pre-emption and co-entry rights are subject to the usual exceptions and end with an IPO. It`s not uncommon for preferred investors to require startup creators to enter into a co-sale deal.

Co-sale rights give investors the right. The venture capital firm contributes to the management and success of the company. Five years later, he wants to sell his stake in the company and finds a buyer, Company A, who offers to buy the shares for, for example, 20 $US each. Since minority shareholders have co-sale rights, they can join the venture capital company and offer their shares to company A for 20 $US. The right of pre-emption and the right of co-sale (“ROFR”) cooperate to prevent a founder or regular shareholder from selling shares without the company and investors being able to buy the shares or participate in the sale of the shares. . . .

Co-Sale Agreement · September 14, 2021 · 10:38 am
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