Some Issues On Right Of First Refusal In A Limited Liability Corporation

This Article explores the nature of Right of First Refusal(RFR)held by a shareholder and the relevant clause in a limited liability corporation.RFR,also known as a “preemptive right”,is practically supposed to be one of the most significant forms of share transfer restrictions in a limited liability corporation,and in fact represents a key characteristic of a limited liability corporation.Whether put in the Continental law or Anglo-American law,RFR would be regarded as a flexible variant between in personam contract rights and in rem property rights no matter in whatever name.Based on the famous mode created by Thomas W.Merrill and Henry E.Smith,RFR could be further recognized as a quasi in rem property right due to its functional contribution to a limited liability corporation.Yet basically speaking,the clause stipulating a RFRis expected to be opted in and out according to the bargain principle,so this clause is no way governed by mandatory rules,in the other hand,is no more than a “penalty default”.The distinctive norm is originated from the theory of “efficacy of non-contractual private ordering” which MA Eisenberg developed in the environment of publicly held corporations but the writer introduced to the limited liability company.