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equity


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1. A beneficial interest in an asset. For example, a person having a house worth £250,000 with a mortgage of £100,000 may be said to have an equity of £150,000 in the house. See also negative equity.

2. The amount of money returned to a borrower in a mortgage or hire-purchase agreement, after the sale of the specified asset and the full repayment of the lender of the money.

3. The net assets of a company after all creditors (including the holders of preference shares) have been paid off.

4. The ordinary share capital of a company (see equity capital.)

5. The market value of a company's issued ordinary shares.

6. The system of law developed by the medieval chancellors and later by the Court of Chancery. It is distinguished from the common law, which was developed by the king's courts, having originated from the residual jurisdiction delegated by the king to the chancellor. A citizen dissatisfied by the common law could petition the chancellor, who might grant relief on an ad-hoc basis. In time this developed into a complementary but separate system of law providing remedies unavailable at common law, such as specific performance of a contract rather than damages. Until 1873 equity was applied and administered by the Court of Chancery, and equitable remedies were not available in the common law courts (and vice versa). However, the Judicature Acts of 1873 and 1875 merged the two systems so that any court may now apply both common law and equity. If the two sets of rules contradict each other, the equitable rule prevails. Equity has been particularly important in the development of the law of trusts, land law, administration of estates, and alternative remedies for breach of contract. See also negative equity.

Subjects: Business and Management.


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