- May 6, 2020
- Knowledge Repository
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Investor’s Right to Transfer
Explaination: This terms provides investors with the right to transfer any or all of their shares in the company as per their own discretion except to the Competitors.
How it applies to Startup/Investor and its impact: Not only the Founder’s, Investors also wish to sell or transfer their shareholding. Investors generally negotiate for transfer without any restrictions such as ROFO, ROFR and Tag-Along. They have only one restriction that they cannot transfer their shares to the Competitior, however this restriction also falls away in case they are not given an exit at the mutually agreed time period.
If the Start-up is matured and is doing really well, the Founders can compel restrictions like ROFO on Investor’s Shares. This situation does not arise in an early stage Start-ups.