Legal Definitions - pro rata

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.