A right of first offer requires a shareholder who wants to sell to give the other shareholders a chance to buy before the seller ever approaches an outside buyer — the opposite order of operations from a right of first refusal, where an outside offer has to exist first.
Neither term is defined in the Canada Business Corporations Act itself; both are contractual transfer restrictions the shareholders write into the corporation’s constating documents. The statutory hook is CBCA section 6(1)(d), which lets a corporation’s articles state “that the issue, transfer or ownership of shares of the corporation is to be restricted” along with “a statement as to the nature of such restrictions” — the same enabling clause that lets a right of first offer, a right of first refusal, a tag-along or a shotgun clause bind the corporation in the first place. In practice most of these clauses live inside a separate shareholders’ agreement rather than the public articles.
The direction of the two rights is the whole distinction. Our sister firm’s Ontario shareholder-agreement guide describes the refusal version this way: “A right of first refusal requires a shareholder holding a genuine third-party offer to offer the shares to the others on the same terms first.” A right of first offer reverses that sequence: the seller has no outside offer yet, and must put the opportunity to the other shareholders first, on terms the seller sets, before shopping the shares externally at all. If the insiders decline within the window the agreement itself sets — there is no statutory deadline — the seller becomes free to negotiate with a third party.
Whichever version a deal uses, once it is written into a unanimous shareholder agreement, the right survives a later transfer: a purchaser of the shares is deemed a party to the agreement under CBCA section 146(3), so a right of first offer cannot simply be sold around.
Two co-investors each hold 50% of a CBCA holding company through a USA that carries a right of first offer. One wants to exit. Before contacting any outside buyer, the exiting shareholder must give the other written notice of the intended sale and a proposed price; the remaining shareholder then has the agreed window to make a binding offer at that price. If the remaining shareholder declines or the two cannot agree, the exiting shareholder is free to negotiate with a third party — often capped, by the agreement’s own drafting rather than by any rule of law, at no less than what was offered internally.
See also: Right of first refusal · Unanimous shareholder agreement · Shotgun buy-sell clause.
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