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Dictionary by pitch.dog
Term-sheet control & investor rights · Core

Pro rata right

Also called: pre-emptive right, participation right

ELI5

An investor can buy enough in the next round to avoid dilution.

Used in conversation

“The pro rata right is limited to major investors.”

Definition

A contractual right to participate in future financings to maintain ownership, subject to conditions.

Here “Pro rata right” means: A contractual right to participate in future financings to maintain ownership, subject to conditions.

Pitch context

You will see “Pro rata right” in fundraising decks, data rooms, term sheets and investor conversations when the discussion reaches term-sheet control & investor rights.

Why it matters: In term-sheet control & investor rights, a loose definition can change rights, obligations, approval, disclosure or enforceability.

Caution

Meaning, enforceability and required process vary by jurisdiction and agreement; this definition is not legal advice.

Connected terms

  • Pre-emption rightBoth can preserve ownership, but the exact trigger, holder and legal source differ by financing documents and jurisdiction.
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Sources & evidence · 5

Direct term-level sources and supporting source families.