Pro-rata rights
Investor's right to participate in future rounds to maintain ownership percentage.
| United States | Pro-rata / preemptive rights |
|---|---|
| Canada | Pro-rata rights (or preemptive rights under CBCA s. 28) |
| UK | Pre-emption rights (CA 2006 s. 561) |
How pro-rata rights work in practice
A Series A investor holds 15% of a company. The company raises a Series B that would issue 25% new equity. Without pro-rata rights, the Series A investor would be diluted to 11.25%. With pro-rata rights, the investor can purchase enough Series B shares to maintain their 15% position (or close to it, depending on the exact mechanism).
- Mechanism is contractual, typically in the investor rights agreement or the convertible/SAFE terms
- Typically granted to major investors only (above a threshold like $1M invested or 5% ownership)
- Not all SAFE and convertible note holders get pro-rata, but it's a common ask
- Investor can choose to participate (in full or partially) or pass — it's a right, not an obligation
Pro-rata vs super pro-rata
Standard pro-rata lets an investor maintain their current percentage. 'Super pro-rata' (uncommon, occasionally negotiated by lead investors) lets them increase their stake by buying more than their pro-rata share. Most term sheets resist super pro-rata because it constrains the company's ability to bring in new strategic investors.
Octelligence tags each investor's pro-rata entitlement on the cap table. When a new round is modeled, the platform calculates each investor's pro-rata allocation automatically.
View cap tablePro-rata, ROFR, drag-along, MFN, registration rights. Recorded against the share, surfaced when relevant.