Registration Rights: What You Need To Know

Under federal law, securities can only be offered or sold pursuant with a registration statement filed with the Securities and Exchange Commission, or in accordance with an applicable exemption from the registration requirements. Stock held by venture capital funds and other investors in portfolio companies is not typically registered initially. This is where registration rights come into play. Registration rights give the investor the ability to require the company to facilitate the resale of the shares, ensuring they can sell previously unregistered securities into the public market. As such, these rights are considered by many investors to be among the most important issues in financing in later rounds. Read more.