40.3.27: Registration Rights Agreement

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Abstract

To many investors, registration rights are one of the most important issues in a financing. If an investor is in a minority position in a nonpublic company, his exit possibilities depend on decisions made by others. Thus, some founders are proud that they have turned down entreaties from investment bankers to take their companies public. They claim that public shareholders might cramp their style and interfere with their ability to run the company according to their own tastes. Well and good for the founder, but not so comforting to a minority investor locked into the founder's company. Even if the investors as a group are in control of the company, there may be differences of opinion as to when an exit strategy should be implemented; indeed, each investor may have a different sense of timing on the issue, based on facts peculiar to that investor. See Note on