The legal world can be confusing, especially for those with little to no experience within the sector. When you enter the field, you will be hit with a multitude of jargon and terms you will never have heard of before, and trying to translate what everything means can be complicated.
To help you out as industry leaders in company registrations, we have compiled a glossary of UK Company Law terms which will hopefully allow you to navigate the legal world and find your way with a bit more understanding of the language being used. However, we are always here to help if you still have difficulty understanding certain terms or deciphering documents; please read on to learn more.
A
Alternate Dispute Resolution (ADR) – A dispute resolution that is not attending court.
Antecedent Transaction – Transactions occurring before a company goes into administration.
Asset Purchase Agreement (APA) – A contract regarding one company purchasing another company’s assets.
Articles of Association – A document detailing the company’s powers, limitations, and information about directors and shareholders. This is created upon the incorporation of the company.
A document created at the time of the incorporation of a company which
details the duties, rights, obligations, limitations and powers of the
company, its directors, shareholders, and any other members it may
have. Initially, companies often adopt the model articles of association
B
Balance Sheet – This displays the financial information of a company, often used to demonstrate the amount of cash a business has to pay shareholders.
Bonds – Issued by the company and can be purchased by individuals or organisations, acting as a loan.
Breach of Contract – When an individual or organisation breaks terms previously agreed in a contract.
Bridge Loans – Financing options typically chosen by companies with short-term cash flow worries as they are a short-term choice.
C
Capital Markets – A financial system involved in the buying and selling of assets, such as bonds.
Cash Flow Statement – A demonstration of how a company is operating financially.
Conditions Precedent (CP) – Conditions that must be met before a contract can come into full effect.
Creditor – An individual or organisation that is owed capital.
D
Director – The individual who runs the business.
Disclosure – The exchanging of information, such as legal, commercial, or financial.
Dividend – Profits paid to the shareholders.
Due Diligence – This ensures that all parties know everything they need to know before making purchases official.
E
Earn-Out – An agreement which states that a business seller should receive some of the sale price.
Economies of Sale – A production price of a single unit reducing if mass production is conducted.
Equity Finance – When a company sells some of its shares in return for cash.
F
Fixed Charge – Security over an asset allowing the charge holder to sell assets and use the funds to satisfy debts.
Floating Charge – Financial security that forms charges over the day-to-day assets of a business.
Freehold – Outright ownership, the opposite of a lease.
Friendly Takeover – When senior management recommends acquisition to shareholders.
G
Gross Profit – Profit after production and distribution.
H
Heads of Terms – The agreed terms of a transaction in the form of a document.
Hostile Takeover – When senior management does not recommend acquisition to shareholders.
I
Income Statement – A document containing income and expenses.
Initial Public Offering (IPO) – When a private company issues shares to the public for the first time.
Institutional Investor – An organisation that invests on behalf of clients.
J
Joint Venture – When two or more parties join together with the same goal.
L
Leveraged Finance – Starting a project using third-party debt.
Litigation – When a dispute is resolved through court.
M
Mediation – A reconciliation process that uses a settlement.
Merger – When two or more businesses merge.
N
Net Profit – Profit made after all costs have been considered, including tax.
O
Official Receiver – An individual appointed to collect assets should a company go into liquidation.
P
Professional Negligence – When an individual fails their professional duty.
R
Refinancing – When an agreement is made to replace debt with a new lender.
S
Shareholder – An individual who owns shares in a company.
Syndicated Loans – When lenders merge to loan a high amount requested by a borrower.
T
Target Company – A company chosen as a merger.
Traded Endowment Policy – When a long-term investment is sold before expiration.
U
Underwriters – These are used to take on a company’s financial risk.
Unfair Dismissal – When a dismissal breaches statutory employment rights.
W
Warranties – These documents act as a promise in the form of a statement that can be referred back to if a breach is made.
Wrongful Dismissal – When a dismissal breaches an employee’s contract.
Of course, this is not an exhaustive list, and you may come across other terms and uses of jargon that you fail to understand. However, this is nothing to worry about, as we, as leading providers of corporate services, are here to help. Please don’t hesitate to get in touch if you require company secretarial services, such as assistance with your documents.
