Antidilution Provision Law and Legal Definition

Anti dilution provision is a provision in a convertible security which protects an investor from dilution resulting from later issues of stock at a lower price than the investor originally paid. It safeguards the conversion privilege from share splits, share dividends, or other transactions that might affect the conversion ratio. Conversion ratio is the number of common shares into which a convertible security may be converted or the ratio of the face amount of the convertible security to the conversion price. In most states anti dilution provisions are valid only if it is made explicit in a corporation's charter.