Registration rights

(noun)

A contractual agreement specifying conditions for registering shares of stock with the SEC prior to selling them on a security exchange.

Related Terms

Examples of Registration rights in the following topics:

  • IPOs

    • The registration rights agreement between the company and the venture capitalists requires the company to register the offering of shares by venture capitalists under certain conditions.
    • These conditions may be in the form of "demand rights" or "piggyback rights".
    • Demand rights require the company itself to prepare, file and maintain a registration statement on behalf of the investors' shares, so that investors can actually initiate a public offering and sell their shares.
    • Piggyback rights require that the VC investors' shareholdings are included in a company-initiated registration, so that the investors can sell their shares when the company initiates a public offering.
    • The number of each type of demand or piggyback rights, the percentage of investors necessary to exercise these rights, allocation of expenses of registration, the minimum size of the offering, the scope of indemnification and the selection of underwriters and brokers are all areas of potential negotiation in the registration rights agreement.

  • Venture Capital

    • Lenders have a legal right to interest on a loan and repayment of the capital, irrespective of the success or failure of a business.
    • Registration right, defined as the special rights to demand registration of their stock on public exchanges, and to participate in an IPO

  • Shelf Registration

    • Shelf registration is a type of public offering in which the issuer is allowed to offer several types of securities in a single prospectus.
    • The prospectus (often as part of a registration statement) may be used to offer securities for up to several years after its publication .
    • Shelf registration is usually available to companies deemed reliable by the securities regulation authority in the relevant country.
    • Shelf registration is a registration of a new issue which can be prepared up to two years in advance, so that the issue can be offered quickly as soon as funds are needed or market conditions are favorable.
    • By using shelf registration, the firm can fulfill all registration-related procedures beforehand and go to market quickly when conditions become more favorable.

  • Securities Exchange Act of 1934

    • In 1938, the Exchange Act was amended by the Maloney Act, which authorized the formation and registration of national securities associations to supervise the conduct of their members subject to the oversight of the SEC.
    • While the '33 Act recognizes that timely information about the issuer is vital to effective pricing of securities, the Act's disclosure requirement (the registration statement and prospectus) is a one-time affair.
    • While the '33 Act contains an antifraud provision (Section 17), when the '34 Act was enacted, questions remained about the reach of that antifraud provision and whether a private right of action—that is, the right of an individual citizen to sue an issuer of stock or related market actor, as opposed to government suits—existed for purchasers.

  • Securities Act of 1933

    • Unless they qualify for an exemption, securities offered or sold to the public in the U.S. must be registered by filing a registration statement with the SEC.
    • The prospectus, which is the document through which an issuer's securities are marketed to a potential investor, is included as part of the registration statement.
    • Among other things, registration forms call for:
    • For public offerings, the main requirement of the Securities Act is registration.
    • Rule 144, promulgated by the SEC under the 1933 Act, permits, under limited circumstances, the sale of restricted and controlled securities without registration.

  • Formation of the Corporation

    • Registration is the main prerequisite to a corporation's assumption of limited liability.
    • Registration is the main prerequisite to a corporation's assumption of limited liability.
    • In Canada, this possibility is taken to its logical extreme: many smaller Canadian corporations have no names at all, merely numbers based on a registration number (for example, "12345678 Ontario Limited"), which is assigned by the provincial or territorial government where the corporation incorporates.
    • A registration fee is due, which is usually between $25 and $1,000, depending on the state.
    • The legal ending indicates that it is, in fact, a legal corporation and not just a business registration or partnership.

  • Corporations

    • A charter is a legal document from government that creates the corporation.By law, the corporation becomes an independent legal entity with rights similar to a person.A state government approves corporate charters in the United States.For example, several corporations choose the State of Delaware because the state charges the lowest fees to incorporate.
    • Corporations could issue two different classes of stock: common stock and preferred stock.Common stock allows stockholders to vote at stockholder meetings, while preferred stock does not have any voting rights.For stockholders to give up their voting right, they will receive their dividends before the common stockholders.Consequently, a corporation could issue preferred stock to expand operations and not share control of the corporation with the new preferred stockholders.Moreover, corporations can pay different dividends, paying a higher dividend to the common shareholders.
    • Redeemable Stock – a corporation has the right to repurchase the preferred stock in the future.
    • Dividing line between tax evasion and avoidance can be a thin one.Since the 2007 Great Recession is still impacting the world economy in 2013, some tax authorities penalize and fine companies that use tax avoidance.Unfortunately, tax collections are down, and many governments are becoming aggressive in tax collections.For example, Italian tax inspectors board yachts as they dock in Italian ports.Italian yacht owners registered their yachts in the Cayman Islands, avoiding registration fees and avoiding the VAT fuel taxes.Consequently, theItalian ports reported 40% declines in yacht docking as the yacht owners avoid Italy's ports.Unfortunately, the economies around the ports suffer from fewer customers, who shop and eat in the local communities, which could further depress tax revenues.

  • The Valuation of Bonds

    • Registered Bonds: Corporation registers the names and addresses of the bondholders.Most corporations register bonds because the registration protects the investors from loss or theft of the bonds.
    • Convertible Bonds: Bondholders have the right to exchange the corporate bonds into corporate stock on a specified date.

  • Advantages of Private Financing

    • Being a publicly traded company entails administrative costs, such as annual reports, registration with regulating bodies, and communicating with shareholders.

  • Seasoned Equity Offering

    • A secondary market offering broadly means that shares are sold, but not by the company through the registration of new shares.