Legal Definitions - Subject to partial divestment

When an interest or right is described as subject to partial divestment, it means that an existing ownership, share, or claim can be reduced or diminished in the future if certain specified conditions are met or events occur. Essentially, someone currently holds a particular interest, but there's a possibility that a portion of that interest might be taken away or shared with others later on, without completely eliminating the original holder's interest.

Here are some examples to illustrate this concept:

• Example 1: Inheritance and Future Heirs

  Imagine a will that states: "I leave my entire estate to my daughter, Jane, but if any more grandchildren are born after my death, they shall share equally in the estate." At the time of the will-maker's death, Jane might be the only grandchild. She initially inherits the entire estate. However, if her siblings later have children, those new grandchildren will also become beneficiaries, reducing Jane's overall share. Jane's initial full inheritance is therefore subject to partial divestment by the birth of future grandchildren.

• Example 2: Property Development Rights

  A property owner sells a large parcel of land to a developer, but the sales agreement includes a clause stating that if the developer successfully obtains zoning approval for a high-rise building on a specific corner of the property within five years, the original owner will receive an additional 5% equity stake in that specific high-rise project. The developer's initial 100% ownership of the high-rise project's equity (should it be built) is subject to partial divestment, as a portion of it would transfer to the original landowner if the zoning condition is met.

• Example 3: Business Equity and Performance Incentives

  A startup founder initially owns 80% of the company's shares. However, the company's operating agreement specifies that if the Chief Technology Officer (CTO) achieves certain product development milestones within two years, the CTO will be granted a 10% equity stake in the company, which will come directly from the founder's shares. The founder's initial 80% ownership is subject to partial divestment because a portion of it will be transferred to the CTO upon the successful completion of the agreed-upon milestones.