Whether you’ve only recently decided to seek out capital for your business or you’ve already received (or made) your first offer, the term sheet (or “letter of intent”) is an integral part of the process.
In this series we’ll look to shed some light on the legal language contained in that term sheet by taking a “deep dive” into the most often used terms and how choices made in selecting those terms can affect both Company and Investor. Check out an overview here.
Last week when discussing redemption rights, I equated them to a sword hanging over the Company’s head. That’s because the right of an Investor to redeem his or her investment is not usually actionable. The Company simply isn’t likely to have the funds to pay back. The key to the term is the “leverage” given to the Investors, not the right itself.
Today we discuss another Investor “leverage” term: Registration Rights.