An organization planning to become a public limited company needs to register with the SEC before they can sell their shares to the public. The shares of the company cannot be sold unless it has a registration right agreement. The agreement is usually prepared when the company and investors enter into a mutual consent. The registration right protects the share holder from risk of forcing them to retain a security.
The key provisions required to be mentioned in a registration right agreement are as follows:
- The name and details of the investor or investors who has the right to register their shares need to be mentioned in the agreement
- The registration right effective sate needs to be mentioned in the agreement
- A company may sometimes refuse to honor the rights. Such situations need to be addressed in the agreement
- The issue of indemnification also needs to be mentioned in the agreement
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