Yes, all co-owners of the dam must sign. But, my understanding is that if one refuses to sign, the other co-owner can just jump through a few hoops with the AKC and get the litter registered. This seems consistent with the fact that the AKC's primary mission is to document the lineage of the pups and the AKC does not like to get in the middle of ownership squabbles. I am not positive if any of this is true and am posting it as an inquiry. I have often wondered if this is true. The person who told me this is a long time and very successful breeder and show person. But even people of this stature don't know everything...
Breeder
All owners of record for the dam must sign the litter registration, only one sire owner has to sign to register a litter with AKC.
Taken from
http://www.akc.org/reg/registeralitter.cfm
"To register a litter, the litter owner should complete an an AKC Litter Registration Application . The application requires basic information such as the date of birth, number of males and females born, and the registered names and numbers of the sire and dam. The application must be signed by all of the owners and co-owners of the dam and by one owner of the sire. Failure to complete the application properly will result in processing delays."
The new owner wasn't looking for full registration from the get go. He totally understood his puppy would be sold on limited. His puppy evaluated very well and that's when the question about showing came up.
Then sell it on limited registration and he can train and practice at matches. You can change it to full registration when he has clearances. If he wasn't interested in showing from the get go you are asking for trouble. This hobby requires a passion, not a passing interest.