Anti-dilution clause: Copy, customize, and use instantly
Introduction
An anti-dilution clause is designed to protect an investor from dilution of their equity interest in a company. It typically ensures that if new shares are issued, the investor’s ownership percentage will not decrease significantly, typically through mechanisms like weighted average or full ratchet adjustments. This clause is important for investors to maintain their relative ownership in case of future rounds of funding or other equity issuances.
Below are templates for anti-dilution clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard anti-dilution clause
This version covers the basic anti-dilution protection.
In the event that the [Company] issues additional shares of its stock, including [list of shares], at a price lower than the price per share paid by the [Investor], the [Investor] shall be entitled to receive additional shares to maintain their original ownership percentage.
Anti-dilution clause with weighted average adjustment
This version includes a weighted average anti-dilution adjustment.
If the [Company] issues additional shares at a price lower than the price per share paid by the [Investor], the [Investor]’s shares shall be adjusted through a weighted average formula to reflect the new issuance price, ensuring that the [Investor]'s percentage ownership is maintained.
Anti-dilution clause with full ratchet adjustment
This version includes a full ratchet anti-dilution adjustment.
In the event that the [Company] issues additional shares at a price lower than the price per share paid by the [Investor], the [Investor] shall receive additional shares to bring their ownership percentage back to the level it would have been had the new shares been issued at the original price.
Anti-dilution clause with no issuance below original price
This version restricts the issuance of shares below the original price.
The [Company] shall not issue any additional shares of its stock, including [list of shares], at a price lower than the price per share paid by the [Investor] without the consent of the [Investor].
Anti-dilution clause with a cap on adjustments
This version includes a cap on the adjustments.
The anti-dilution adjustment provided in this clause shall not exceed a [X]% reduction in the [Investor]’s per-share purchase price, even if the [Company] issues additional shares at a significantly lower price.
Anti-dilution clause with cap on adjustments
This version includes a cap on anti-dilution adjustments.
The [Investor]’s anti-dilution protection shall be limited to a [X]% reduction in their original purchase price, regardless of the price at which new shares are issued in subsequent funding rounds.
Anti-dilution clause with adjustment based on issuing price
This version adjusts based on the price of new shares issued.
If the [Company] issues additional shares at a price lower than the original price per share paid by the [Investor], the [Investor] shall receive additional shares to ensure their ownership percentage is not diluted below its original value.
Anti-dilution clause with conversion right in case of issuance
This version gives the [Investor] the right to convert to maintain ownership.
The [Investor] shall have the right to convert their preferred shares into common shares in the event of a dilutive issuance, to preserve their equity stake, at the same conversion price as originally paid.
Anti-dilution clause with recalculation of price
This version includes recalculation of the price per share.
In the event that the [Company] issues additional shares at a price lower than the price per share paid by the [Investor], the conversion price of the [Investor]'s preferred shares will be recalculated to reflect the lower price, thereby maintaining their relative ownership percentage.
Anti-dilution clause with adjustment based on number of shares issued
This version adjusts based on the number of shares issued.
The anti-dilution protection for the [Investor] shall be triggered if the [Company] issues additional shares in excess of [X]% of its outstanding shares at a price lower than the original purchase price paid by the [Investor].
Anti-dilution clause with protection during early-stage funding
This version protects during early-stage funding rounds.
In the event that the [Company] raises capital in any round following the [Investor]’s initial investment at a lower valuation, the [Investor] shall receive additional shares to ensure their percentage ownership remains consistent with their original investment.
Anti-dilution clause with protection during convertible note conversion
This version includes anti-dilution protection for convertible notes.
If the [Company] issues additional shares during a conversion of convertible notes that dilutes the [Investor]’s equity, the [Investor] shall receive additional shares to maintain their ownership percentage.
Anti-dilution clause with adjustment for stock splits and reverse stock splits
This version includes protection against stock splits.
In the event of a stock split, reverse stock split, or any other similar corporate event, the anti-dilution adjustment shall be made to ensure the [Investor] maintains the same percentage ownership as prior to such event.
Anti-dilution clause with right to participate in new issuance
This version gives the [Investor] the right to participate in new issuances.
The [Investor] shall have the right to participate in any new equity issuance by the [Company], at the same terms as the new investors, to prevent dilution of their ownership interest.
Anti-dilution clause with adjustment for employee stock option grants
This version adjusts for employee stock option grants.
The [Investor] shall receive anti-dilution protection for any equity granted to employees or consultants in connection with an employee stock option plan, such that the [Investor]'s ownership percentage is not diluted by such grants.
Anti-dilution clause with adjustment for debt-to-equity conversion
This version adjusts for debt-to-equity conversion.
If the [Company] converts any outstanding debt into equity, the [Investor] shall receive additional shares to preserve their percentage ownership, based on the conversion price of the debt.
Anti-dilution clause with protection for strategic investors
This version includes protection for strategic investors.
In the event of a dilutive issuance, the [Company] agrees that strategic investors, including the [Investor], shall not be subject to dilution in excess of [X]%, and the [Company] shall make appropriate adjustments to protect their equity position.
Anti-dilution clause with full ratchet protection
This version includes full ratchet protection.
If the [Company] issues additional shares at a price lower than the price paid by the [Investor], the full ratchet anti-dilution protection will apply, ensuring that the [Investor]’s shares are adjusted to reflect the lower price per share.
Anti-dilution clause with floor on adjustment
This version includes a floor on anti-dilution adjustments.
The anti-dilution adjustment for the [Investor] shall not result in a price per share that is lower than [X] amount, even if new shares are issued at a significantly lower price.
Anti-dilution clause with protection for certain financing rounds
This version limits anti-dilution protection to certain rounds.
The [Investor] shall receive anti-dilution protection only in the event of a down round or a Series A financing, but not for subsequent rounds of funding, unless specified otherwise.
Anti-dilution clause with adjustment for non-equity funding
This version adjusts for non-equity funding.
In the event the [Company] raises non-equity financing (such as convertible debt or other hybrid securities), the [Investor] shall not be subject to dilution, but will have the right to convert or receive additional shares under specific terms outlined in the Agreement.
Anti-dilution clause with protection for follow-on investments
This version protects follow-on investments.
The [Investor] shall have the right to make a follow-on investment in the [Company] at the same price per share as the price paid by any new investors, to preserve their ownership interest in the [Company].
Anti-dilution clause with adjustment for dividends
This version includes protection against dividend dilution.
If the [Company] issues dividends in the form of shares, the [Investor] shall receive additional shares in the same proportion as the dividend distribution to ensure their ownership is not diluted.
Anti-dilution clause with adjustment for other securities issuance
This version protects against other securities issuance.
The [Investor] shall be protected from dilution in the event that the [Company] issues convertible securities, warrants, or options at a price lower than the [Investor]’s original purchase price, with an appropriate adjustment made to the [Investor]’s equity interest.
Anti-dilution clause with adjustment for acquisition
This version adjusts for an acquisition event.
In the event the [Company] is acquired, the [Investor]’s shares will be adjusted to reflect the terms of the acquisition, ensuring that the [Investor] maintains their proportionate ownership interest in the combined entity.
Anti-dilution clause with adjustment for issuance of equity compensation
This version includes adjustment for equity compensation issuance.
If the [Company] issues equity compensation, including options, restricted stock units, or warrants, the [Investor] shall receive an anti-dilution adjustment to preserve their ownership interest, based on the dilution caused by such issuance.
Anti-dilution clause with right to convert in case of down round
This version allows conversion in case of a down round.
In the event of a down round, the [Investor] shall have the right to convert their preferred shares into common shares at the new, lower price per share, ensuring that their equity interest is maintained.
Anti-dilution clause with adjustment for warrants issuance
This version adjusts for the issuance of warrants.
If the [Company] issues warrants to purchase shares at a price lower than the [Investor]’s original purchase price, the [Investor] shall receive an adjustment to their shares to maintain their original percentage ownership.
Anti-dilution clause with limitation on adjustment for additional issuances
This version limits anti-dilution adjustments for additional issuances.
The [Investor]’s anti-dilution protection shall not apply to any new issuances of shares, options, or warrants made as part of employee compensation plans, provided that such issuance does not exceed [X]% of the total outstanding shares.
Anti-dilution clause with adjustment for preferred stock issuance
This version adjusts for the issuance of preferred stock.
In the event the [Company] issues new preferred stock at a price lower than the price paid by the [Investor] for their current preferred shares, the [Investor] shall receive additional shares to maintain their equity percentage.
Anti-dilution clause with adjustment for debt-to-equity conversion
This version adjusts for debt-to-equity conversions.
If the [Company] converts outstanding debt into equity at a price lower than the price paid by the [Investor], the [Investor]’s shares will be adjusted accordingly to preserve their percentage ownership.
Anti-dilution clause with adjustment based on new investor participation
This version includes adjustments based on new investor participation.
If the [Company] issues shares to new investors at a price lower than the price per share paid by the [Investor], the [Investor] shall receive an adjustment to their ownership percentage, as determined by the number of new shares issued.
Anti-dilution clause with limitation on adjustments for future offerings
This version includes limits on adjustments.
The [Investor]’s anti-dilution protection shall not apply to any future offerings of shares in excess of [X]% of the total shares outstanding immediately prior to the offering.
Anti-dilution clause with pro-rata adjustment
This version allows pro-rata adjustments.
In the event of a dilutive issuance, the [Investor] shall receive additional shares on a pro-rata basis to maintain their percentage ownership in the [Company] after the new issuance.
Anti-dilution clause with price-based adjustment formula
This version includes a price-based formula.
If the [Company] issues additional shares at a price lower than the price paid by the [Investor], the [Investor]’s shares will be adjusted using a formula based on the ratio of the new issuance price to the original price.
Anti-dilution clause with adjustment in case of convertible securities issuance
This version adjusts for convertible securities.
If the [Company] issues convertible securities at a price lower than the price paid by the [Investor], the [Investor]’s shares will be adjusted to reflect the impact of the new issuance on their ownership stake.
Anti-dilution clause with weighted average adjustment for multiple rounds
This version includes weighted average protection over multiple rounds.
The [Investor] shall receive a weighted average adjustment to their shares if the [Company] conducts multiple rounds of financing at a lower price than the price paid by the [Investor], using the average price of all rounds.
Anti-dilution clause with protection against the issuance of options
This version includes protection against option issuance.
The [Investor] shall be entitled to anti-dilution protection in the event the [Company] issues options or warrants at a price lower than the [Investor]’s original purchase price, ensuring their percentage ownership remains unchanged.
Anti-dilution clause with adjustment for issuance of convertible debt
This version includes protection for convertible debt issuance.
If the [Company] issues convertible debt that converts into equity at a lower price than the price paid by the [Investor], the [Investor]’s equity stake will be adjusted to reflect the effect of the new issuance.
Anti-dilution clause with protection for intellectual property sales
This version protects against the sale of intellectual property.
If the [Company] sells any intellectual property that was critical to the [Investor]’s decision to invest, the [Investor] shall receive anti-dilution protection to offset the potential decrease in company value due to the loss of these assets.
Anti-dilution clause with adjustment for acquisitions
This version includes adjustment in the event of an acquisition.
If the [Company] is acquired and the acquiring party issues additional shares at a lower price, the [Investor] shall receive an anti-dilution adjustment to preserve their ownership percentage post-acquisition.
Anti-dilution clause with protection for key employees
This version protects against key employee equity dilution.
The [Company] shall not issue additional shares or equity-based compensation to key employees, including [list of employees], that would significantly dilute the [Investor]’s ownership interest without providing the [Investor] with anti-dilution protection.
Anti-dilution clause with protection in case of loss of key contracts
This version provides protection in the event of lost contracts.
If the [Company] loses any key contracts that were integral to the value of the [Investor]’s investment, the [Investor] shall be entitled to an anti-dilution adjustment to account for the reduced value of the business.
Anti-dilution clause with adjustment for public offerings
This version adjusts in case of public offerings.
In the event that the [Company] conducts an initial public offering (IPO) at a price lower than the price per share paid by the [Investor], the [Investor] shall receive an adjustment to their shares to reflect the lower offering price.
Anti-dilution clause with automatic adjustments for down rounds
This version provides automatic adjustments for down rounds.
In the event the [Company] conducts a down round of financing, the [Investor]’s shares will automatically adjust to preserve their ownership percentage, based on the price at which the new shares are issued.
Anti-dilution clause with adjustment for future equity incentives
This version includes adjustments for future equity incentives.
The [Company] agrees that any future equity incentives granted to employees or other stakeholders that would dilute the [Investor]’s shares shall be subject to anti-dilution adjustments to protect the [Investor]’s ownership.
Anti-dilution clause with no adjustment for strategic partnerships
This version excludes strategic partnerships.
The [Investor] shall not receive anti-dilution protection for any equity issuances as part of strategic partnerships, joint ventures, or collaborations unless such issuances result in a significant change to the [Investor]’s ownership percentage.
Anti-dilution clause with protection during a capital raise
This version provides protection during capital raises.
During any subsequent capital raises, the [Investor] shall be entitled to purchase additional shares to maintain their ownership percentage, at the same price and terms offered to new investors.
Anti-dilution clause with limitation on the number of shares
This version limits the number of shares that can trigger anti-dilution protection.
Anti-dilution protection shall not be triggered if the issuance of additional shares exceeds [X]% of the [Company]’s total outstanding shares, unless the [Investor] consents to such issuance.
Anti-dilution clause with adjustment for convertible securities issuance
This version includes anti-dilution protection for convertible securities.
If the [Company] issues any convertible securities, including convertible notes or preferred stock, at a lower price than the price paid by the [Investor], the [Investor]’s shares shall be adjusted to reflect the impact of the new issuance.
Anti-dilution clause with protection against change in capital structure
This version protects against changes in capital structure.
In the event that the [Company] undergoes a change in capital structure, such as a reclassification of its stock or issuance of new equity classes, the [Investor] shall receive anti-dilution protection to preserve their ownership in the [Company].
Anti-dilution clause with repurchase option for diluted shares
This version includes a repurchase option.
If the [Investor]’s shares are diluted due to a new issuance at a lower price, the [Investor] shall have the right to require the [Company] to repurchase a portion of their shares at the original purchase price to restore their ownership percentage.
Anti-dilution clause with exemption for employee stock option grants
This version exempts employee stock options.
The [Investor] shall not be entitled to anti-dilution protection for any issuance of stock options or warrants under the [Company]’s employee stock option plan, provided that the total number of shares issued does not exceed [X]% of the total outstanding shares.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.