Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Equity definition

What does Equity mean? In corporate finance practice, equity means the risk-bearing capital provided by a company’s owners, usually through ordinary shares, as distinct from debt finance. Equity holders have the residual interest in profits and assets: returns are by dividend or capital growth, and they rank behind all creditors on insolvency. Equity commonly carries voting and control rights and is subject to company law capital maintenance and distribution rules (for example, dividends only out of distributable profits and statutory pre-emption on new share issues unless disapplied). It is central to capital structure, M&A, venture capital and private equity transactions. Practitioners also describe certain...

Restructuring finance under English law: equity injections, new lending, priority, security, negative pledges and tacking

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

Need for new money

For numerous companies encountering financial strain, the first and most common response is to secure extra liquidity to carry the business through a downturn in results and to sidestep a more formal restructuring or formal insolvency procedure. This can occur where the enterprise is believed to be sound at its core yet experiencing a temporary dip in trading conditions. Alternatively, the request for finance may serve as a short-term bridge, giving the company and its stakeholders breathing space to evaluate the business’s current viability and the merits of a restructuring. This Practice Note considers the potential forms that fresh funding can take and the related legal issues that may arise.

Ways to fund

In practice, fresh capital typically arrives in one of two forms:

an Equity injection—new or current shareholders acquiring additional Shares in the company, or
a new debt obligation—new or existing lenders advancing further monies to the company

Equity injection

Existing shareholders can commit additional capital by subscribing for newly issued shares in the company, thereby preventing dilution of their present stake and preserving any existing majority positions within the shareholder base...

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Web page updated on 27/05/2026

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