Yesterday I wrote about drafting Stock Purchase Agreements, which set the terms for the purchase of stock by an investor from the seller. These agreements are most often used in conjunction with a funding event in which the seller is the Company, and I mentioned that there were several other types of agreements that were commonly drafted as part of the financing, including the lowly Registration Rights Agreement.
“Why lowly?” you ask. Well, in my fifteen years of entrepreneurial and venture-backed company experience, Registration Rights Agreements are perhaps the most over drafted and under-used legal agreement. The reason for this is simple – you almost never see the key terms of the agreement enforced over the wishes of the Company. Specifically, registration rights agreements give the investors the right to force a secondary offering of their shares on the public markets, but in practice this is almost never done because this would not be conducive to a productive and profitable offering. About the only terms that have any practical substance are the indemnification of the underwriters and the provisions whereby the Company picks up the expenses of the offering in the event it is done with the Company’s cooperation.
That being said, for those of you in need of sample registration rights agreements to review for your own research and drafting needs, I’ve provided a few links in this post. Here is another helpful discussion of what registration rights agreements are all about. Let me know what you think – are these a holdover from another day and time where lawyers are trying to strut there stuff, or are these still a real and vibrant part of the consideration for a financing?
