[ncd]

Precisely--this is the exact reason that ROFRs exist. They make sure that a company has the option of keeping its cap table clean in the event of a sale by an employee.

What these companies want is to have their cake and eat it too: prohibit sales of stock to outsiders without having to pay for the privilege.

The cynic in me says that this is because companies of this kind are far less likely to be in the position to exercise ROFRs and pay for it via profits simply because they are not yet profitable. And I'm sure investors don't like the idea of their capital being used to buy back shares of vested stock from employees.

[mgummelt]

It doesn't matter whether the cost is incurred on profits or otherwise, they just don't want to pay. Vetoing sales is unfair, but rational on the part of the company, so long as their recruits and employees don't understand the implications of these contracts, and therefore aren't choosing other employers on that basis.

Including this constraint in the bylaws of the company rather than the Option Agreement is particular devious, and I've actually never heard of such a trick. I'm surprised it's legal.