Corporate Law Jargons - Part 2 Flashcards
(25 cards)
Indenture
A formal written agreement, typically used in the context of bond issuances, outlines the terms, conditions, and covenants between bond issuers and bondholders.
Earn-Out
A contractual provision in mergers and acquisitions where additional future compensation is paid to the seller based on the business achieving specified financial goals post-acquisition.
Accretive Acquisition
A type of acquisition where the acquiring company’s earnings per share (EPS) increase as a result of the transaction, typically due to cost synergies or favorable purchase terms.
Negative Pledge Clause
A provision in a loan agreement where the borrower agrees not to encumber certain assets with additional liens, ensuring priority for existing lenders.
Derivative Suit
A lawsuit brought by a shareholder on behalf of a corporation against third parties—usually insiders like executives or directors—for harm done to the company.
Anti-Dilution Provision
A clause used in venture capital agreements that protects investors from equity dilution in the event that new shares are issued at a lower price than the original investment.
Escrow
A financial arrangement where a third party holds and regulates the payment of funds or assets until specified contractual conditions are met.
No-Shop Clause
A contractual provision restricting a party (often a seller) from soliciting or accepting competing offers for a specified period, commonly used in M&A transactions.
Clawback Provision
A contractual clause that allows an employer or investor to reclaim previously granted compensation or benefits, typically in cases of misconduct or restated earnings.
Dilution Protection
Legal mechanisms in investment agreements are designed to shield existing shareholders from value loss when new shares are issued at a lower valuation.
Standstill Agreement
An arrangement between parties (often in M&A or hostile takeover scenarios) where one party agrees to limit its actions, such as refraining from acquiring more shares or making a takeover bid.
Legal Capital
The portion of a company’s equity that cannot be distributed to shareholders as dividends, intended to protect creditors by ensuring a base level of funding remains within the business.
Arbitrability
A doctrine determining whether a specific dispute is subject to arbitration under applicable law and the governing arbitration agreement.
Dragnet Clause
A contractual provision that extends the reach of a security interest or guarantee to cover not just the current obligation but also future debts between the parties.
Affiliated Company
A company that is related to another company by shareholding, control, or mutual interest, commonly used in corporate structuring and regulatory compliance.
Mandatory Convertible Bonds
Hybrid financial instruments that automatically convert into equity at a specified date or upon the occurrence of certain events, often used to manage capital structure strategically.
Waterfall Provision
A clause in investment or loan agreements specifying the hierarchical order in which proceeds or repayments are distributed among stakeholders.
Put-Call Agreement
A contract granting one party the right to sell (put) and another the right to buy (call) a security or asset under agreed terms, often used in joint ventures and shareholder exits.
Patent Troll
A pejorative term for entities that acquire patents not to produce or innovate, but to enforce them aggressively through litigation and extract licensing fees.
Hedging Clause
A provision in financial or commercial agreements that allows parties to engage in risk-mitigation strategies, particularly in currency, commodity, or interest rate exposures.
Piercing the Corporate Veil
A legal action that allows courts to disregard the separate legal personality of a corporation, holding shareholders personally liable for corporate obligations in cases of fraud or abuse.
Syndicated Loan
A loan provided by a group of lenders (a syndicate) to a single borrower, typically used for large-scale corporate financing and structured under a common set of terms.
Escalation Clause
A contractual provision that allows for adjustments to agreed-upon prices or costs due to changes in external factors like inflation, raw material costs, or regulatory charges.
Deadlock Resolution Clause
A contractual mechanism used in joint ventures or partnerships to resolve impasses in decision-making, such as through buy-sell arrangements or third-party arbitration.
