Equity warrants—private company


Published by a ÑÇÖÞÉ«ÇéÍø Corporate expert
Practice notes

Equity warrants—private company


Published by a ÑÇÖÞÉ«ÇéÍø Corporate expert

Practice notes
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This Practice Note provides an overview of Equity Warrants in the context of Private company investment. Listed equity warrants and debt warrants (of any nature) are beyond the scope of this note.

What is a warrant?

A warrant is a contractual financial instrument that allows the holder special rights to buy Securities. They are discretionary rights that expire. In many respects, they are similar to options.

What is an equity or share warrant?

An equity warrant is a financial instrument under which a company grants a contractual right (but not an obligation) to a third party (the warrantholder) to subscribe for a specified class of shares in that company (ie equity securities). Under a debt warrant, the subscription right is over debt, rather than equity, securities.

Equity warrants, sometimes referred to as share warrants, should be distinguished from bearer shares, or 'share warrants to bearer', which, until being abolished under the Small Business, Enterprise and Employment Act 2015, were unregistered shares owned by whoever physically held the instrument. Companies have been prohibited from issuing bearer shares since 26 May 2015.

The

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Key definition:
Equity definition
What does Equity mean?

Capital that is used to finance companies in the form of ordinary share capital as opposed to debt finance. The term is also sometimes used to describe preference shares or subordinated loan capital contributed by equity investors (commonly known as quasi-equity) to distinguish it from third party debt.

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