What are the most common rights of the preferred stock?

Preferred stock offers a company and its investors flexibility in structuring an arrangement that provides the company with needed capital while also providing investors a fixed minimum return and certain protections. Circumstances, objectives and the bargaining power of the parties will determine which preferences will make it to the final term sheet.

 

Each series of preferred shares may have different rights and preferences. The most common features of preferred stock are:

 

         Dividend payment preferences

         Participating and non-participating

         Liquidation preferences

         Redemption rights

         Anti-dilution protection

         Carve outs to anti-dilution protection

         A right of first refusal and co-sale agreement

         Voting rights

         Board representation

         Registration rights

         Piggyback registration rights

         Pay to play provision

         Optional conversion into common stock

         Drag-along or bring-along provisions

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