Pro rata

Pro rata is a legal term derived from Latin and literally means ‘in proportion’. It refers to the proportional allocation of rights, obligations or amounts among multiple parties according to their respective share, contribution or the duration of their involvement.

The term is relevant across various areas of law, including company law, tenancy law and insurance law, as it ensures a fair and equitable distribution. In practice, pro rata is applied, for example, in the distribution of dividends to shareholders who held shares for only part of the year, or in the apportionment of costs upon the early termination of a contract.