"Look to your left, look to your right-one of you won't be here next year." - The Paper Chase.

If one of the founders decides to sell his or her shares in the company, a right of first refusal ("RoFR") allows the company or the investors to purchase those shares. The company will have the first option to buy the shares back, in which case all of the shareholders (founders and investors) will get a bigger share of the company after the purchase. If the company doesn't exercise this right, the investors can then buy the remaining shares, giving them a bigger equity stake in the company compared to the founders. The third alternative is that neither the company nor the investors buy the shares, and a new investor comes into the company, also reducing the founders' share.

An RoFR is not entirely bad for the company because it helps control the investors the company takes on. The investors you know are often better than the investors you don't. And, if you have board control, you can always have the company buy back the shares if it can afford to. But, the company should try to limit the amount of equity in the company that the existing investors can purchase under the RoFR to prevent fewer people from controlling more of the company, especially if it will let them control the board.

Ask for Common Participation. One way to help keep control of the company is by asking that all of the company's shareholders, not just the investors, have the right of first refusal. Many companies will already have a right of first refusal between founders, allowing the company or other founders to purchase shares if one of the founders decides to sell out. If you already have a right of first refusal, then the founders are giving up this right and letting investors take it. In either case, it doesn't hurt to ask for participation. If founders are willing to put the money up to buy the shares, why not let them in on the deal?

Another common provision, also called a co-sale or "take-me-along" right, is like the flip side to an RoFR. It allows the investors to participate in any sale proposed by the founder by also selling a portion of their stock. The portion is usually determined by comparing the percentage ownership in the company of the seller with the percentage ownership of the investors who want to participate in the sale. In some cases, the co-sale right can prevent founders-especially small shareholders-from getting rid of their company stock because the investors will be able to take up a much greater percentage of the sale.

It's unlikely that founders will be able to get rid of the co-sale right, so should try to negotiate exclusions. These would include things like transfers to family members or transfers for estate planning purposes.