picture of Rajah

Rajah Lehal

Anti-Dilution Clause May Prevent Company from Issuing Additional Shares

July 17, 2015

Links from this article:Read the article here.

The representation that the company may issue additional shares in the future means that the company may dilute the shares of the subscriber at will. A subscriber who does not wish to give the issuer the ability to dilute their shareholding may require that anti-dilution provisions to be included in the subscription agreement.

The largest shareholder (Caitlyn Limited) of Azumah Resources holding 13% of the shares reinvested $2.1 million. As part of the investment, the subscription agreement contained an anti-dilution clause where the shareholder was to maintain its 13% equity holding for 12 months.

Read the article here.Take away:

  • When subscribing to shares of a company, consider negotiating an anti-dilution provision in your subscription agreement to avoid having your equity holding in the company significantly diluted.

Written by Rajah. Rajah Lehal is Founder and CEO of Clausehound.com. Rajah is a legal technologist and technology lawyer who is, together with the Clausehound team, capturing and sharing lawyer expertise, building deal negotiation libraries, teaching negotiation in classrooms, and automating negotiation with software.