Anti-Dilution Provision

In the venture capital and private equity context, a provision which protects an equity holder from dilution ( www.practicallaw.com/0-504-3650) due to subsequent equity issuances (issued either directly or indirectly through options or convertible securities). This protection can be provided by giving equity holders:

For a detailed discussion of anti-dilution provisions, see Practice Note, Anti-Dilution Provisions in Private Equity Transactions ( www.practicallaw.com/5-547-8051) . For a form of warrant containing standard anti-dilution provisions, see Standard Documents, Warrant (General Form) ( www.practicallaw.com/2-501-1200) and Warrant (Penny Warrant Form) ( www.practicallaw.com/0-502-5552) . For an outline of the main issues and negotiating points in the anti-dilution provisions of a general form of warrant, see Negotiating Warrant Anti-Dilution Provisions Checklist ( www.practicallaw.com/3-503-7271) .

In the context of publicly-traded debt securities convertible into common equity, a provision that protects the conversion value of the security against the impact of a corporate event that transfers company assets from the company to existing common stockholders. For more information on anti-dilution adjustments in publicly-traded convertible bonds, see Practice Note, Anti-Dilution Adjustment Formulas in Convertible Bonds ( www.practicallaw.com/4-505-2987) .

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