FAQS
What are S-3 registration rights?
- Financing
- Preferred Stock
An S-3 registration entitles investors to demand that a company register their shares on a Form S-3 registration statement. A Form S-3 has a shorter registration statement than a Form S-1—which is used in an IPO—and may be used by a company one year after an IPO.
A Form S-3 requires less effort by a company than a Form S-1 because the company is allowed to refer to certain items contained in its other SEC filings.
The items typically negotiated in the S-3 registration rights provision include:
- Number of S-3 Registrations. Typically, the company may want to limit the number to one or two in any 12-month period, while the investors will want unlimited S-3 registrations. There are legal and accounting expenses associated with an S-3 registration, which the company will want to limit.
- Minimum Size of an S-3 Registration. The company will want the amount of securities to be registered to be greater than a certain dollar amount, such as $1 million, in order to avoid frivolous registration requests.
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