A contractual right that requires an asset holder in a company to offer to sell its asset to the right holder before offering to sell it to third parties. The seller is obligated to exclusively negotiate in good faith with the holder of the ROFO and to try to reach an agreement before starting negotiations with a third party. If the right holder does not buy the offered equity, the selling holder usually has a limited period of time to sell to a third party, on terms no more favorable than those offered to the right holder.

Almost any kind of asset can be subject to a right of first offer. In the corporate or LLC context, the ROFO is held by a stockholder or member of an LLC, respectively, and obligates an equity holder in a company to offer to sell its equity to the other holders before offering to sell to third parties.

In a real property context, a ROFO can apply to real property that is both owned and leased. An owner of real property is contractually obligated to sell or lease its real property to the holder of the option before offering to sell or lease the real property to third parties. If the holder of the option does not buy or lease the offered real property, the owner usually has a limited period of time to sell or lease the real property to a third party, but the sale or lease must be on terms no more favorable that those offered to the holder of the option. If the terms offered to the third party are more favorable, often the owner is required to go back to the holder of the option with the more favorable terms and give the holder of the option another opportunity to accept the offer.

The ROFO to purchase real property is usually contained in a stand-alone agreement between the owner of the real property and the holder of the ROFO. A ROFO to lease real property is usually contained in the lease agreement between the owner of the real property and holder of the option, which is usually a tenant in the real property. The ROFO typically gives the tenant the opportunity to lease additional space in the real property.

Equityholders can also hold a right of first offer over new equity issuances by the company itself. These rights are known as pre-emptive rights.

See also Right of First Refusal (ROFR).