Non-Dilution Provision
Content
Definition
A Non-Dilution Provision is a clause in an investment agreement that protects an investor from equity dilution in future financing rounds.
Usage and Context
Non-dilution provisions ensure that an investor`s ownership percentage in a company is maintained, even when new shares are issued in future financing rounds.
Frequently asked questions
- What does no dilution mean? No dilution means that an investor`s ownership percentage in a company remains unchanged, even when new shares are issued.
- What is the difference between dilution and nondilution shares? Dilution shares are subject to a reduction in ownership percentage when new shares are issued, while non-dilution shares are protected from this reduction.
- Why are anti-dilution provisions important? Anti-dilution provisions are important because they protect investors` ownership interests and ensure that their investment value is not diminished by future share issuances.
Benefits
Non-dilution provisions protect investor interests, maintain ownership percentages, and ensure investment value is preserved in future financing rounds.
Conclusion
Non-dilution provisions are crucial for protecting investors from equity dilution, ensuring their ownership stakes and investment values remain intact during future financings.
