Dilution Definition

GLOSSARY

What does Dilution mean?

A reduction in earnings per share and book value per share due to an increase in the number of shares issued. This can occur if convertible securities are converted or warrants or employee stock options are exercised.

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Due diligence—occupational lease alienation provisions—checklist

Due diligence—occupational lease alienation provisions—checklist On any due diligence exercise on the acquisition of a property for investment purposes, it is essential to consider the ability of the occupational tenants to assign, charge and underlet their respective premises. Any provisions that are too flexible may have an adverse impact on value as it may lead to covenant dilution. In an occupational lease with an open market rent review, any provisions that are too restrictive may have an adverse impact on value, as they may be considered onerous. Assignment Can the tenant assign? Assignment may be: • prohibited • permitted without consent—this will be the case if the lease is silent; however, note that a covenant not to part with possession prohibits assignment, or • permitted with landlord’s consent—if assignment is permitted with landlord’s consent, the covenant is always subject to a proviso that consent is not to be unreasonably withheld (regardless of whether this is specifically imposed by the lease) If assignment is prohibited and there is an open market...

Undertakings for Collective Investment in Transferable Securities—timeline [Archived]

Undertakings for Collective Investment in Transferable Securities—timeline [Archived] ARCHIVED: This Practice Note is archived and is no longer maintained. UCITS stands for undertakings for collective investment in transferable securities. The term originates from Directive (EC) 85/611 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (the Original UCITS Directive) which was adopted in 1985. The aim of the Original UCITS Directive was to create a single market for open-ended retail investment funds which afforded enhanced protection for investors. The UCITS rules have been revised a number of times, with the introduction of the Management Company Directive 2001/107/EU adopted in 2002 and the Product Directive 2001/108/EU implemented in 2005 (together known as UCITS III), the implementation in 2011 of Directive 2009/65/EC (the UCITS Directive, also known as UCITS IV) which repealed and replaced the Original UCITS Directive, and Directive 2014/91/EU (UCITS V) which was transposed into national law on 18 March 2016. Date Source Document Description 2026 31 December 2026 HMT and...

Open offers

Open offers This Practice Note focuses on the key aspects of open offers and the matters that require consideration when an open offer is being carried out by a company either: • admitted to listing on the official list (Official List) of the Financial Conduct Authority (FCA) and to trading on the main market for listed securities of the London Stock Exchange (LSE) (Main Market) (listed company), or • admitted to trading on AIM, a market operated by the LSE (AIM company) (both a listed company and an AIM company being a company). It does not cover placings or rights issues. For information on these transactions see Practice Notes: Placings, A guide to cash box placings, Rights issues—key considerations and Rights issue—procedure for a listed company. What is an open offer? An open offer is: • an offer made by a company to existing shareholders • to subscribe for or purchase new shares (or other securities) for cash • in proportion to their holdings, ie a...

Landfill Directive—snapshot

Landfill Directive—snapshot Title Council Directive 1999/31/EC of 26 April 1999 on the landfill of waste (the Landfill Directive) Entry into Force 16 July 1999 Deadline for Transposition 16 July 2001 Key amendments Directive 2011/97/EU of 5 December 2011 amending the Landfill Directive as regards specific criteria for the storage of metallic mercury considered as waste. In force: 13 December 2011. Member States’ transposition deadline: 15 March 2013.Directive (EU) 2018/850 of 30 May 2018 amending the Landfill Directive. In force: 4 July 2018. Member States’ transposition deadline: 5 July 2020. Subject landfill, environmental permitting Objectives The Landfill Directive aims to prevent or reduce as far as possible negative effects on the environment, in particular the pollution of surface water, groundwater, soil and air, by providing stringent operational and technical requirements on the waste and landfills. It also aims to minimise any resulting risk to human health, from landfilling of waste, during the whole life-cycle of the landfill. Transition towards a circular economy 2015 Circular Economy Pacakage The 2015 Circular...

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Anti-dilution ratchet provisions—articles—non-leveraged investment

Anti-dilution ratchet provisions—articles—non-leveraged investment Add new Article 14 as follows: 14. Anti-dilution 14.1 In this Article 14, unless the context otherwise requires the following expressions shall have the following meanings: New Securities means any Shares or other securities convertible into, or carrying the right to subscribe for Shares, issued by the Company after the date of adoption of these Articles. 14.2 If the Company issues any New Securities at a price per Share less than the Issue Price of the Preferred Shares (Qualifying Issue), the Company shall, subject to Article 14.6, make a bonus issue of such number of [Ordinary OR Preferred] Shares (Anti-Dilution Shares) to each holder for the time being of Preferred Shares (Exercising Investors) calculated as follows (rounding down to the nearest whole Share): [ [Full Ratchet] ADS = (TP / P) – N Where: ADS = the number of Anti-Dilution Shares; TP = the total amount subscribed (whether in cash or by way of conversion of loan) by such Exercising Investor for...

Ireland—Debenture: single company chargor—bilateral—all monies

Bilateral debenture for a chargor incorporated as a limited company in Ireland to secure the chargor’s obligations to the lender on an all monies basis Using this Precedent Debenture This is a precedent bilateral Debenture which can be used to take security over all of the assets of a company. This drafting note explains the context in which this precedent Debenture might be used as well as the features of this precedent Debenture and the assumptions on which it is based. Negotiating a security package—general principles A lender's primary concern is that it is repaid. If a borrower fails to repay a loan the lender may have to go to court to obtain a judgment for payment of the sum owed to it. Even if it obtains such judgment this does not mean that the lender will be repaid in full or even in part. For example, if the borrower is insolvent, the lender may have to share the borrower's available assets with other creditors and will only receive part...

Dive into our 3 Precedents related to Dilution

Can a private company limited by shares carry out a rights issue?

Can a private company limited by shares carry out a rights issue? A rights issue is an offer of shares to existing shareholders of a company, which gives them the right to subscribe for additional shares in proportion to their existing shareholding in the shares of the company, eg, a right for each shareholder to subscribe for one new share for every five shares that they hold. The shares are usually offered to the existing shareholders by means of renounceable letters or other negotiable instruments. If a company wants to raise new capital through an issue of its ordinary shares for cash, it is prima facie obliged by section 561 of the Companies Act 2006 (CA 2006) to do so by means of a rights issue in favour of its existing shareholders. CA 2006, s 561 sets out statutory pre-emption rights and states that a company must not allot equity securities to a person on any terms unless: • it has made an offer to each holder of...

What are the options for emergency equity fundraisings for listed companies in light of the coronavirus (COVID-19) pandemic?

What are the options for emergency equity fundraisings for listed companies in light of the coronavirus (COVID-19) pandemic? With the coronavirus (COVID-19) pandemic continuing to cause significant economic turmoil, many listed companies may need to raise funds quickly through equity capital fundraisings. Equity fundraisings can be split into two different types: pre-emptive offerings and non-pre-emptive offerings. In a pre-emptive offering, such as a rights issue or an open offer, shareholders are given the opportunity to subscribe in the fundraising pro-rata to their existing shareholdings. In a non-pre-emptive offering, such as a placing, shares are offered to selected investors and this will see the holdings of existing shareholders in the company diluted. The key types of secondary fundraisings which a listed company may consider in an emergency situation are discussed below. Placing In a placing, shares are usually offered to a selected group of institutional investors for cash. The placing is generally structured so that it falls within one of the exemptions from the requirement to publish...

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Private Client weekly highlights—12 December 2024

This week’s edition of Private Client highlights includes: (1) JTC Employer Solutions Trustee Ltd v Garnett, in which the High Court granted rescission of deeds of appointment executed for EBTs on grounds of mistake; (2) Oldham MBC v KZ, in which the Court of Protection authorised a care plan for a deaf man with fluctuating capacity; (3) Rupert Grint v HMRC, where the FTT held that sales of occupation income provisions applied to a capital sum received by the taxpayer on the incorporation of his business; (4) Tianrui IHC v China Shanshui Cement Group Ltd (Cayman Islands), a Privy Council decision on a shareholder’s personal standing to challenge the dilution of its shareholding; (5) Aabar Holdings S.A.R.L v Glencore plc, a decision which casts doubt on a shareholder’s entitlement to see a company’s privileged documents; and (6) HMRC publishes minutes of the November meeting of joint HMRC/industry working group on the non-dom changes.

Dispute Resolution weekly highlights—5 December 2024

This week's edition of Dispute Resolution weekly highlights includes analysis of a number of key DR developments and key judicial decisions including the UK Supreme Court and the Judicial Committee of the Privy Council’s publication of their new Practice Directions and the launch of their new online case management portal as well as the Court of Appeal decision in Ali v HSF Logistics Polska SP ZOO (ex turpi causa and causation defences); dates for your diary; details of our most recently published content; and other information of general interest to dispute resolution practitioners.

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GLOSSARY