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LSDefine
Simple English definitions for legal terms
pro rata
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A quick definition of pro rata:
Pro rata means "in proportion." It is used to describe how things are divided or shared fairly. For example, if a company pays a pro rata dividend, it means that each shareholder gets a share of the dividend based on how many shares they own. So, if there are 100 shares and $1,000 in dividends, each share is worth $10. If someone owns five shares, they get $50 in dividends.
A more thorough explanation:
Definition: Pro rata is a Latin term that means "in proportion." It is used to describe proportional distributions or allocations. In legal terms, pro rata refers to a share to be received, an amount to be paid, or liability based on the fractional share of ownership, responsibility, or time.
Example: A company has 100 shares outstanding and it announces it will pay $1,000 in dividends to its shareholders. The pro rata amount that each share is worth is $10. If a shareholder owns five shares, they will receive $50 in dividends.
This example illustrates how pro rata works in terms of dividends. Each shareholder receives a dividend payment that is proportional to the number of shares they own. In this case, the dividend payment is $10 per share, so a shareholder who owns five shares will receive $50 in dividends.