Rights of First Refusal/ Membership Interest/ L.L.C. members

General Real Estate Investing
1

Hello, good day. I have a question about the concept of “rights of first refusal.” I hope that any investors or attorneys in the forum can provide me with some understanding about the subject. From my research, I have read that the concept of "rights of first refusal"can be defined through the following example:

Name of company: ABC, L.L.C.
Number of Members: 3
Format: Partnership
Member A membership interest is valued at $10, 000
Member B membership interest is valued at $15,000
Member C membership interest is valued at $8,000

Company agreement contains a “right to first refusal” provision for its members.

If member C desires to sell his interest to a non-member, third party, member C is obligated to first offer his valued membership interest ($8,000) to Member’s A and B, if Members A and B are not willing to pay Member C the value of his membership interest, then he has the option to sell to the non-member third party.

If the third party is willing to pay Member C $9,000 for his membership interest, but the established value of his membership interest is $8,000 (established by whatever accounting methods), what are the options for member C?

Thanks to all for the response.

2

I’m not an atty and i don’t play on one TV.

Generally, the ROFR provision provides that if any member receives an offer from a prospective third-party purchaser to buy any portion of his or her membership interest, he or she must first offer that interest to the remaining members on the same terms and conditions as received from the third-party purchaser. The remaining members then have a set time period in which to determine whether to exercise their right of first refusal and purchase the selling member’s interest or allow the sale to go through to a third party.

Of course, your specific language may be different.

3

Thanks for the information mcwagner, good day.