Corporate Law Jargons - Part 3 Flashcards
(25 cards)
Clean Room Agreement
A legal arrangement used in M&A due diligence allowing limited access to sensitive competitive information under strict confidentiality by an independent third party.
Subrogation Waiver
A clause in insurance or contractual agreements where one party agrees not to pursue subrogation rights against the other, often to preserve business relationships or simplify claims resolution.
Orphan Share
In environmental liability, this refers to a portion of cleanup costs that cannot be attributed to a responsible party, often due to insolvency or unidentifiable ownership.
Bad Leaver Clause
A provision in shareholder or employment agreements that penalizes an individual who leaves a company under negative circumstances, often affecting their shareholding rights.
Side Letter Agreement
A supplementary agreement that clarifies, modifies, or adds to the terms of a main contract without altering the principal document.
Tacking (in IP Law)
The legal doctrine that allows a trademark owner to maintain priority by “tacking” a new mark onto an older one if the two are legally equivalent and create the same commercial impression.
Squeeze-Out Merger
A transaction in which majority shareholders force minority shareholders to sell their shares, typically used to take a company private.
Inducement Letter
A side agreement intended to persuade one party to enter into a main contract, often used in complex M&A or investment transactions.
Inverse Condemnation
A legal action initiated by a property owner against the government, claiming compensation for property devaluation due to public use without formal expropriation.
Overcapitalization
A financial condition where a company has more capital than it needs, often resulting in low returns on investment and inefficient capital usage.
Interpleader
A legal procedure allowing a neutral third party holding property or money to initiate a lawsuit compelling claimants to litigate amongst themselves to determine entitlement.
Lock-Up Period
A timeframe post-IPO or investment during which insiders or early investors are prohibited from selling their shares, intended to stabilize the stock’s price.
Quiet Title Action
A legal proceeding to establish a party’s title to real property and “quiet” any challenges or claims to the title.
Mezzanine Financing
A hybrid form of capital that combines debt and equity, typically used to finance expansion or acquisitions, often carrying higher risk and return.
Crystallization Clause
A provision in security agreements that converts a floating charge into a fixed charge upon the occurrence of certain triggering events.
Basket Clause (in Indemnity Provisions)
A threshold amount of loss that must be reached before indemnification obligations kick in, common in M&A agreements.
Double Derivative Suit
A legal action initiated by a shareholder of a parent company on behalf of a subsidiary, asserting claims the subsidiary has against its management or third parties.
Staple Financing
Pre-arranged financing offered by an investment bank to potential buyers during an M&A transaction, intended to streamline the bidding process.
Cramdown
A bankruptcy mechanism where a court confirms a reorganization plan over the objections of certain classes of creditors, provided legal requirements are met.
Evergreen Clause
A contract provision that automatically renews the agreement for a successive period unless one party gives notice of termination.
Management Buy-In (MBI)
The purchase of a company by an external management team that intends to take control of the operations, often supported by private equity backing.
Synthetic Equity
A form of compensation that mimics actual equity ownership, such as stock appreciation rights or phantom stock, granting economic benefits without conferring actual shares.
Ratchet Clause
A provision in investment agreements ensuring that early investors’ equity percentages are preserved or adjusted favorably in case of future down-round financing.
Information Rights
Contractual entitlements, often granted to investors, to receive specific financial and operational data about a company at regular intervals.
