Pro Rata

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What It Means

A Pro Rata refers to a proportional share of something based on some objective measure, such as number of shares. Profit dividends are a common example of a Pro Rata distribution, because each owner receives a portion of the overall distribution based on the number of shares they own.

Why It’s Important

Pro Rata terms can show up in investment documents relative to future investment rights where each investor receives the right to participate in future investment rounds Pro Rata to their current investment. Pro Rata rights clauses help ensure that all current owners will get a fair share of any future investment opportunities.

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