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Law: key words > Corporate > Flashcards

Corporate Flashcards

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1
Q

Mergers and acquisitions (M&A)

A

The process where companies are combined or bought out by other companies

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2
Q

Due diligence

A

investigative analysis of a business prior to signing a contract or investment

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3
Q

Corporate governance

A

The system of rules, practices and processes by which a firm is directed and controlled

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4
Q

Shareholder agreements

A

Contracts among a company’s shareholders detailing the rights and obligations

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5
Q

Intellectual property (IP)

A

Legal rights to inventions, designs and artistic works

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6
Q

Compliance

A

Adherence to laws, regulations, guidelines and specifications

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7
Q

litigation

A

The process of taking legal action to court

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8
Q

Arbitration

A
  • A form of dispute resolution decided outside of court
  • You both take your case to an arbitrator who is an independent body
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9
Q

Mediation

A

A facilitated negotiation process to resolve disputes

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10
Q

Joint ventures

Example

A

A commercial enterprise undertaken jointly by 2 or more parties

Disney, Warner Bros and Fox teaming up for live sport

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11
Q

Private equity

A

Investment capital in companies that are not publicly traded

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12
Q

Venture capital

A
  • Financing provided to startups and small businesses with long term growth potential
  • Equity based (get a stake in the company)
  • Innovate is the biggest UK VC firm

eg Chat GPT

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13
Q

Initial public offerings (IPO’s)

A

The process of offering shares of a private company to the public

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14
Q

Securities

A

Financial instruments that represent an ownership position or creditor relationship with a corporation

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15
Q

Stock exchange

A

A marketplace where securities such as stocks and bonds are bought and sold

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16
Q

Market capitalisation

A

The total value of a company’s outstanding shares and stock
-How much the company is worth according to the stock market

Stocks held by shareholders

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17
Q

Fiduciary duty

A

A legal obligation of one party to act in the best interest of another

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18
Q

Due process

A

Fair treatment through the normal judicial system, especially citizens entitlement

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19
Q

Bankruptcy

A

The legal status of a person or entity that cannot repay debts or creditors

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20
Q

Insolvency

A

The state of being unable to pay the money owed, on time or at all

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21
Q

Asset management

A

The systematic process of operating, maintaining and upgrading assets cost effectively

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22
Q

Leveraged Buyout (LBO)

A

The acquisition of another company using a significant amount of borrowed money

Eg 2/3 of Twitter which was bought for $44bn

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23
Q

Corporate bonds

A

Debt securities issued by corporations to finance their operations

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24
Q

Credit rating

A

An assessment of the creditworthiness of a borrower in general terms of with respect to a particular debt or financial obligation

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25
Q

Debt financing

A

Raising capital through borrowing money that must be repaid over time with interest

Eg loans from banks, bonds etc

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26
Q

Equity financing

A

Raising capital through the sale of shares in an enterprise

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27
Q

Securitisation

A

The process of pooling various types of contractual debt and selling consolidated assets to investors

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28
Q

Financial instruments

A

Assets that can be traded with legal documents representing any kind of monetary value
Equity based = asset
Debt based = loan

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29
Q

Derivatives

A

Financial securities based on the value of an asset

Eg future contracts

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30
Q

Hedge funds

A

Investment funds that employ various strategies to earn active return or alpha (excesss returns) for their investors
- Tend to pool money in an attempt to earn above average returns

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31
Q

Mutual funds

A

Investment programs funded by shareholders that trade in diversified holdings (big company that operate in lots of fields) and are professionally managed

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32
Q

Pension funds

A

Investment pools that pay for workers’ retirements. Funds are contributed by workers, employers or both

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33
Q

Compliance risk

A

The threat posed to a company’s earnings or capital due to violation of laws, regulations, codes of conduct, or organisational standards of practice

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34
Q

Operational risk

A

The prospect of loss resulting from inadequate or failed procedures, systems or policies

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35
Q

Market risk

A

The possibility of an investor experiencing losses due to factors that effect the overall performance of the financial markets

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36
Q

Credit risk

A

The risk of loss due to a debtors non-payment of a loan or other line of credit

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37
Q

Systematic risk

A

The risk of collapse of an entire financial system or entire market

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38
Q

Liquidation

A

The process by which a company’s assets are terminated and distributed to claimants

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39
Q

Restructuring

A

The act of reorganising the legal, ownerships, operation or other structures of a company

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40
Q

Cross-border transactions

A

Business dealings involving entities in different countries

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41
Q

Taxation

A

The imposition of taxes; the system of raising money by taxes

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42
Q

Transfer pricing

A

Setting the price for goods and services sold between controlled or related legal entities within an enterprise

Used to move prices around at a lower market value

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43
Q

Anti-money laundering (AML)

A

A set of laws, regulations and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income

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44
Q

Know your customer (KYC)

A

A standard in the investment industry that ensures investment advisors know detailed information about their clients risk tolerance, investment knowledge and financial position

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45
Q

Data protection

A

The process of safeguarding important information from corruption, compromise or loss

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46
Q

GDPR

A

A regulation in EU law on data protection and privacy for all individuals within the EU and the European Economic area

General data protection regulation

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47
Q

Corporate social responsibility

A

A self-regulating business model that ensures companies operate in ways that enhance society and the environment

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48
Q

Environmental, social and governance (ESG)

A

Criteria for a company’s operations that socially conscious investors use to screen potential investments

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49
Q

Sustainability

A

Meeting the needs of the present without compromising the ability of future generations to meet their own needs

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50
Q

Non-Disclosure Agreements (NDAs)

A

Legal contracts that keep confidential work secret

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51
Q

Employment law

A

Legal standards and regulations that govern the relationship between employers and employees, including hiring, working conditions, wages and termination

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52
Q

Discrimination law

A

The body of law that prohibits the unequal treatment of individuals based on certain characteristics, such as race, gender, age or disability

Eg 2010 Equality Act

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53
Q

Health and safety

A

Regulations and procedures intended to prevent accident or injury in workplaces or public environments

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54
Q

Real Estate Transactions

A

The legal process involved in buying, selling, leasing or transferring ownership of real property

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55
Q

Zoning laws

A

Statutes governing how certain areas of land can be used which may include residential, commercial, industrial or other designations

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56
Q

Land use

A

The management and modification of natural environment or wilderness into built environment such as settlements or semi-natural habitats such as arable fields, pastures and managed woods

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57
Q

Intellectual property rights (IPR)

A

The legal right granted to creators and owners of works that are results of human intellectual creativity, which are protected from unauthorised use by others

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58
Q

Trademarks

A

Symbols, names, phrases, logos or other devices used to identify and distinguish products or services of one party from those of others

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59
Q

Patents

A

Exclusive rights granted to an investor to make, use, or sell an invention for a certain number of years, in exchange for publishing an enabling public disclosure of the invention

Eg coca-cola bottles

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60
Q

Copyrights

A

Legal protection given to the creators of original works of authorship such as literary, dramatic, musical, artistic works, and certain other intellectual works, both published and unpublished

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61
Q

Trade secrets

A

Information including a formula, practice, process, design, instrument, pattern or compilation of information, that is generally not know and provides a business with an economic advantage over competitors or customers

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62
Q

Licensing agreements

A

Contracts whereby the licensor allows the licences to use, market, and sell certain intellectual property in exchange for compensation

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63
Q

Mergers and monopolies regulations

A

Legal frameworks designed to control or affect the market power and business practices of corporations to promote competition and prevent monopolies

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64
Q

Competition law

A

A body of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies

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65
Q

Antitrust

A

Laws and regulations designed to protect trade commerce from abusive practices such as restraint of trade, price fixing and monopolies

Same as competition law

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66
Q

Consumer Protection

Example

A

A form of government regulator which protects the interests of consumers, ensuring that they have access to accurate information and are protected from harmful products or unfair business practices
-Consumer rights 2015: consumers can persue small claims courts for faultly eletrical goods

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67
Q

Product liability

A

The legal liability a manufacturer or trader incurs for producing or selling a fault product

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68
Q

Commercial contracts

A

Legally binding agreements between parties where they are obliged to do or refrain from doing certain things. Contracts may be written or oral and involve the exchange of goods, services, money or the promise of any of those

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69
Q

Breach of contract

A

The violation of a contractual obligation by failing to perform one’s own promise, by repudiating it, or by interfering with another party’s performance

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70
Q

Warranty

A

A guarantee provided by the seller or manufacturer to the purchaser that the product is as represented and will be repaired or replaced if it fails within a certain period

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71
Q

Indemnity

A

A contractual obligation of one party to compensate the loss occurred to the other party due to the act of the indemnity or any other party (more of a promise)

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72
Q

Force Majeure

A

A clause included in contracts to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations

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73
Q

Liquidated damages

A

A provision in a contract that specifies a predetermined amount of money that must be paid as damages for failure to perform under a contract

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74
Q

Statute of limitations

A

The time within which a lawsuit must be filed or a criminal prosecution begun. The period starts when the claim or charge is discovered

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75
Q

Jurisdiction

A

The legal authority granted to a court or other institution to interpret and apply laws, adjudicate disputes and carry out justice

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76
Q

Alternative Dispute Resolution (ADR)

A

A range of dispute resolution processes and techniques that act as a means for disagreeing parties to come to an agreement short of litigation

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77
Q

Class action

A

A lawsuit filed or defended by an individual or small group acting on behalf of a large group

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78
Q

Injunction

A

A judicial order that restrains a person from beginning or continuing an action threatening or invading the legal right of another, or that compels a person to carry out a certain act eg to make restitution to an injured party

e.g restraining order

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79
Q

Legal precedent

A

A legal case that establishes a principle or rule that a court or other judicial body may utilise when deciding subsequent cases with similar issues or facts

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80
Q

Common law

A

The body of law derived from judicial decisions of courts and similar tribunals, rather than from statutes or constitutions

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81
Q

Civil law

A

The system of law concerned with private relations between members of a community rather than criminal, military, or religious affairs

82
Q

Statutory law

A

Law written and enacted by a legislative body, statutes may be used to create new laws or to codify existing ones (Parliament in the UK)

83
Q

Case law

A

The law as established by the outcome of former cases

84
Q

Legal due diligence

A

An investigation, audit, or review performed to confirm facts or details of a matter under consideration, often conducted during the process of due diligence before a business transaction

85
Q

Legal audit

A

A systematic examination of an organisation’s legal affairs, usually by an external auditor

86
Q

Risk assessment

A

The identification, evaluation, and estimation of the levels of risk involved in a situation, with a view to determining the appropriate course of action or inaction

87
Q

Corporate strategy

A

An overall plan made by a company to guide its direction and development, especially regarding its structure, product development, and acquisitions

88
Q

Business model

A

The plan implemented by a company to generate revenue and make a profit from operations

89
Q

Market analysis

A

The research conducted to understand the dynamics of the market and the factors that influence it, often including market segmentation and purchasing decisions

90
Q

SWOT analysis

A

A strategic planning technique used to identify and analyze the Strengths, Weaknesses, Opportunities, and Threats involved in a project or business venture

91
Q

PESTLE Analysis

A

A macro-environmental framework used to understand the impact of external factors on an organization, including Political, Economic, Social, Technological, Legal, and Environmental factors

92
Q

Due care

A

The effort made by an ordinarily prudent or reasonable party to avoid harm to another, taking the circumstances into account

93
Q

Goodwill

A

An intangible asset that represents the portion of the business value that cannot be attributed to other business assets

E.g customer base + strong representation

94
Q

Amortisation

A

The process of spreading out a loan into a series of fixed payments over time

95
Q

Depreciation

A

The reduction in the value of an asset over time, due in particular to wear and tear

96
Q

Capital expenditure (CapEx)

A

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment

97
Q

Operating expenditure (OpEx)

A

The money a company spends on an ongoing, day-to-day basis to run a business or system

98
Q

Return on investment (ROI)

A

A performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments

99
Q

Gross margin

A

The difference between revenue and cost of goods sold divided by revenue, expressed as a percentage. It represents the percentage of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells

100
Q

Earnings before interest and taxes (EBIT)

A

An indicator of a company’s profitability, calculated as revenue minus expenses, excluding tax and interest.

101
Q

Bond

A

A loan from an investor to a borrower. The borrower then uses this to fund their operation and the investor receives interest on their investment

Debt financing

102
Q

Trends in AI in law firms example

A
  • A+O has introduced ContractMatrix: an AI-driven contract drafting tool aimed at enhancing the efficiency of legal negotiations
  • Sept 2023: EY has recently launched AI
  • March 2023: Linklaters uses Laila (Chat box AI)
  • Freshfields has the innovation hub in Manchester
103
Q

Impact of Saudi Arabia Policy

A
  • Necessary to have regional HQ in Saudi Arabia in order to make them eligible for state contracts
  • More than 200 firms including PepsiCo announce Riyadh
104
Q

Venture capital in the US

A
  • hit a 6 year low
  • 60% drop from the $173bn raised in 2022
105
Q

Disputes and investigations example

A

HP V Autonomy 2022
- 2011 HP acquired Autonomy (pure software) for $11 bn
- Year later discovered they had cooked the books + halved its value
- HP made a FSMA claim: compensation for misinformation
- Court ruled in favour of HP

106
Q

Stocks
Shares
Equity

A

Stocks = represent the owners part ownership in one or more companies
Shares = refers to units of ownership in a single company
Equity = total ownership stake in a company eg 10% equity stake

107
Q

FTSE definition + is it rising or falling (Jan 2024) + examples

A
  1. Financial Times stock exchange (100 larges companies listed on the London Stock Exchange)
  2. Falling
  3. BP, Shell, HSBC, Unilever, Barclays etc
108
Q

Difference between corporate and commercial law

A

Corporate = closely connected to the lifecycle of companies + law which allow it to function
Commercial = broader range of practice areas eg IP + more of the day to day runnings

109
Q

How do interest rates effect businesses?
Negative + positive

A
  • limit opportunities for growth and development
  • Issues for companies with lots of debt
  • more financial pressure eg collapse of Wilko
  • Rising interest rates benefit some businesses eg banks
110
Q

How do law firms generate business?

A
  • fee earners charge clients for their time
  • billable hours (an hours labour that has been spent on a clients matter)
  • work through referrals, dealing with similar cases, reputation etc
111
Q

Example of an aqusition

Chocolate

A
  • Mars confectionary acquisition of Hotel Chocolat
  • Deal value: $660 million
  • Date agreed: 20th November 2023
  • Mars made a push into the premium segment as a result of government pressure to move towards sustainably sourced cocoa + away from low cost sugar high foods
112
Q

What is the IPEC?

A

Intellectual property enterprise court

112
Q

IP case

Supermarket

A
  1. 2021 Cuthbert VS Collin allegations of copyright (settled in Nov 2021 with a confidential agreement)
  2. Snow Globe gin 2023
113
Q

What is a cartel?

A

Most serious form of anti-competitive behaviour
-set of agreements between companies
- involved price fixing, market sharing, bid rigging or limiting the supply or production of goods and services

114
Q

CMA

A

Competition and Markets Authority

115
Q

Impact of Brexit on competition law

A

EU competition law will no longer apply
- EU competition law will be retained and interpreted in accordance with pre-brexit EU law and case law

116
Q

Example of competition law fine

A

Leicester City FC -2023
- £880k for colluding with JD sports
- Limited competition in the sale if club branded clothing in the UK including replica kit for 3 football seasons + fixing prices

117
Q

LLP

A

Limited liability partnership
- each partners liabilities are limited to the amount they put into the business
- this spreads the risk
- Formal written partnership agreement + tends to come with annual reporting requirements
- completely private + have some tax benefits (partners in a LLP are usually considered to be self-employed + liable to pay tax on their profits

118
Q

Ltd

A

Limited
- Shareholders liability is limited to the capital originally invested
- corporation tax on all profits
- Investors can buy shares without needing to become a director

119
Q

PLC

A

Public listed company
- all companies listed in the London Stock Exchange are PLCs
- offers shares of stocks to the general public
- Eg burberry

120
Q

Key challenges facing the legal sector

A
  1. AI + the future of how law firms will operate
    - Make operations more efficient and competitive by automating tasks that would have required hours of manual labour
  2. UK law firms may try to break the US Market
  3. cyber security risks
  4. ESG is becoming more prevalent than ever before
  5. Pressure to innovate (response to the big 4’s increasing legal presence eg one stop shop model
121
Q

Utilisation rate

A

How much of a solicitor’s 8 hours day gets put towards billable work

122
Q

Realisation rate

A

How much a firms billable work gets included in client bills

123
Q

Collection rate

A

How much a firm’s bills get paid by a client

124
Q

Impact of Covid on law firms

A
  • Slowed rate of M&A
  • there was a relaxation of competition laws
  • Litigation moved online + force majeure clauses
  • uncertainty about the medium term financial implications
  • work from home policies
125
Q

What are undertakings?

A

Statements given orally or in writing, promising to take or refrain from taking certain action in the future
- Often referred to as covenants

126
Q

Impact of rising inflation rates

Supply + demand side

A

Supply side: cost of materials and products increase + costs associated with trade
Demand side: employees might seek higher wages + this is transferred to consumers through higher prices

127
Q

PEP

A

Politically exposed person
- someone that has been trusted with a prominent public function eg PM
- Generally higher risk for involvement in bribery or fraud

128
Q

OPEC

A
  • Organisation of Petroleum Exporting Countries
  • Group of 13 of the world’s major oil-exporting nations
  • Cartel that aims to manage the supple of oil in an effort to set the price of oil on the world market
  • Eg UAE, Saudia Arabia, Iran, Iran, Kuwait, Venezuela, Algeria, Congo, Nigeria, Libya, Gabon, Angola and Equatorial Guinea
129
Q

What is a Future in stock markets?

A
  • Contracts that obligate parties to buy or sell an asset at a predetermined future date or price
130
Q

Enterprise value

A
  • Total value of a company including current share price and the cost to pay off debt
131
Q

AIM

A
  • Alternative investment market
  • London stock exchange for small and medium growth companies
  • Greater regulatory flexibility
  • E.g. ASOS moved to main market in 2022 + Jet2, Boohoo etc
132
Q

LBO

A
  • Leveraged buyout
  • When the acquisition of another company is completed almost entirely with borrowed funds
  • Rise during the pandemic
  • Example: Elon Musk’s purchase of Twitter $44 billion
133
Q

OECD

A
  • Organisation for economic cooperation and development
  • Governments of 37 democracy with market based economies collaborate to develop policy standards to promote sustainable economic growth
  • Eg UK, Denmark, Australia, Japan, US etc
134
Q

UK and US regulatory bodies

A
  • Federal reserve system
  • Competition Market Authority
  • Bank of England
  • Intellectual property enterprise court
135
Q

CEO

A
  • Tends to be the highest rank (CFO reports to them)
  • directs the operation aspects of a company
  • Report to the board
136
Q

Difference between an executive director and non-executive director

A
  • Executive directors are employees of the company
  • Non-exec are not involved in the day to day running + their role is more advisory
137
Q

Private credit fund

A
  • Lending not from a bank + tailored to the borrowers specific needs
  • not traded on public markets
138
Q

S and P

A
  • Standard and Poors
  • Stock market tracking for the top 500 USA companies
  • Eg Apple, Microsoft etc
139
Q

FCA

A
  • Financial Conduct Authority
  • Responsible for the functioning of UK financial markets
  • Aims to ensure: honest and fair markets for all ie competition
  • Charges fees to the firms it regulates
140
Q

PPP

A
  • Purchasing power parity
  • Used to compare economic productivity + standards of living
  • Exchange rate converted into another currency to purchase the same goods
141
Q

Franchise

A
  • type of license that grants a franchisee access to a franchisor’s proprietary business knowledge, processes, and trademarks, thus allowing the franchisee to sell a product or service under the franchisor’s business name
  • In exchange for acquiring a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual licensing fees.
142
Q

Sector

A
  • An actual industry eg mining, media etc
143
Q

Practice

A
  • Refers to the type of legal work that is done in those industries
  • In the energy sector you have litigation, M&A, Project Finance etc
144
Q

Bottom line

A
  • The company’s net income, earnings, profits or profits per share
  • It is used to reference any actions which may increase or decrease net earnings or a company’s income statement
145
Q

Sovereign wealth fund

A
  • State owned investment fund compromised of money generated by the government
  • Often derived from a country’s surplus reserves
  • Usually have a targeted purpose
  • Some countries have sovereign wealth funds that can be similar to venture capital for the private sector
146
Q

What do private equity firms do?

2 things

A
  • Seek to achieve returns on investment that may not be achievable in the public market
  • PE firms aim to raise and manage funds to yield favourable returns for shareholders
147
Q

OBR

A
  • Office for business responsibility
  • Funded by the treasury
  • Aims to offer independent and authoritative analysis of the UK’s public finances
148
Q

Yield

A
  • The income the investment returns over time, typically expressed as a percentage
  • Way of measuring the profitability of an investment over a set period of time
149
Q

Return

A
  • The return is the amount that was gained or lost on an investment over time, typically expressed as a dollar value
  • Way of measuring the profitability of an investment over a set period of time
150
Q

IMF

A
  • International Monetary Fund
  • International organisation that promotes global economic growth + financial stability
  • Encourages international trade and reduces poverty
  • 190 member countries (each with representation in the executive proportionate to their financial importance)
151
Q

Operating expenses

A
  • The result of a business’ normal operations eg materials, labour and machinery involved in production
  • Cannot be avoided and are necessary for the business to run
152
Q

Overhead costs

A
  • What it costs to run the business including rent, insurance and utilities
  • They should be reviewed regularly in order to increase profitability
153
Q

Company

A
  • Legal entity formed by a group of individuals to engage in and operate a business enterprise
  • Could be public or private + separate from what individuals own
154
Q

Enterprise

A
  • A unit of economic organisation or activity
  • All the companies you pay to receive a good or service from
  • Eg Netflix
155
Q

Corporation

A
  • A legal entity that is separate and distinct from its owners
  • Under the law, corporations possess many of the same rights and responsibilities as individuals eg can enter contracts, loan and borrow money, pay taxes etc
  • They are a limited liability (shareholders not responsible for the debts)
  • Eg Microsoft, Coca-Cola Company
156
Q

Dividends

A
  • The distribution of a company’s earnings to its shareholders and is determined by the companies board of directors
  • Dividend yield is the dividend per share + expressed as a percentage of a company’s share price
157
Q

Net income / net earnings

A
  • What a business or individual makes after taxes, deduction and other expenses are taken out
158
Q

Aldi and Lidl takeover

A
  • USP = small, own labelled stuff, limited range (2,000 compared to the average 10,0000), few staff, restocking is easier etc
  • 18% of the market
  • Have started to get more boujee eg middle aisle
159
Q

Thames Water

A
  • 1989 Thatcher privatised water companies
  • 25% of the population
  • All the water companies are facing financial costs over sewage spills
  • Shareholders are being fined which is more money taken from the business
  • There are no maps of the pipes + they only have them when they are doing work on them
  • 16% of our rivers have good ecological status or higher compared to Scotland which has 48% and is publicly owned
160
Q

Investigation by CMA example

Vets

A
  • Looking at vets (16 million people have pets)
  • Issues over transparency (80% have no pricing online) + there isn’t competition
  • Big chains control 60% compared to 10% a few years ago
  • Some firms are making 25% of their revenue on medicine (they have you over a barrel)
161
Q

Significance of Ireland

A
  • Becoming a tech hub: young, highly educated workforce, competitive corporate tax rates, English speaking, GDPRs one stop shop model
  • Companies in the EU only need to deal with the lead supervisory authority of the country that they are based in
  • Ireland is considered to be fairly business friendly
  • UK leaving the EU has made Ireland more desirable as the only English speaking nation
162
Q

Swiss Verein model

A
  • A structure where offices share branding but remain legally and financially independent
  • Advantages: maintains legal and financial independence of members + shared global brand makes marketing easier
  • Disadvantages: Hard to regulate culture and service consistency across firms + potential client confusion about firm relationships
  • E.g. Dentons
163
Q

Best friend network

A
  • Completely independent firms with form a network to refer work to each other
  • Advantages: preserve each firm’s autonomy and flexibility without any ties + no shared financial risks or liabilities
  • Disadvantages: Global clients will have to engage different firms for international work, no shared financial benefits means less incentive to refer work + no real control over partners’ operations.
  • E.g. Travers Smith and Slaughter and May
164
Q

Integrated partnership

Advantages, disadvantages, example etc

A
  • A completely unified entity where international offices share branding, profits, decision making etc
  • Advantages: Unified global brand and culture, integrated firm makes it easier to serve international clients + safety of diversified risks and rewards across all offices
  • Disadvantages: shared financials means that one firm being down can affect others, management and profit sharing arrangement can become politically challenging + hard to regulate culture and service consistency across firms
  • E.g. Linklaters
165
Q

Nationwide example

A
  • Set to acquire Virgin Money for £2.9bn
  • Aims to bring it closer to the UK’s four major high street banks (Barclays, HSBC, Lloyds and RBS)
166
Q

How does PE work?

4 stages

A
  1. First, PE firms gather money, often supplemented by borrowing
  2. Next, they use that money to acquire a business
  3. After that, they “enhance the business’ value” by making changes like cutting unnecessary costs or improving its leadership
  4. within five years of buying it, they try to sell the company at a higher price (due to rising interest rates, this has been hard to do and firms are stuck with a backlog of unsold companies)
166
Q

KPMG AI strategy

A
  • Investing heavily in AI with the aim of outshining traditional law firms
  • Part of the one stop shop model
166
Q

Law firms leaving China

Examples, justifications etc

A
  • Political tensions + decrease in deals and economic activity in China (hard to justify a presence there)
  • US and Chinese governments are concerned with their own national security
  • China has new anti-espionage laws (restricts flow of info outside of the country)
  • Linklaters is cutting lawyer headcounts in three offices in China + Latham and Watkins have closed offices in mainland China
167
Q

Luminance example

A
  • London based AI has secured $40m in funding to expand US presence
  • Aims to grow the AI model that automates legal document negotiations
  • 600 clients across 70 countries
168
Q

Cocoa example

A
  • Reached a new peak in price
  • Crossed $10k per metric tonne for the first time
  • Due to bad weather and disease affecting crops in Ghana
  • Largest supply-demand mismatch in 60 years
  • Firms need to balance increased prices with consumer affordability
169
Q

Why are more firms merging?

A
  • 25% increase in the 1st quarter of 2024 compared to 2023
  • Tough economic conditions: high interest rates, energy costs, professional insurance (smaller firms merging with larger etc)
  • Impact of US firms so UK firms may merge with each other to rival the strong M and A or merge with a US firm
  • Expand geographic reach, widen expertise, cost savings (reduce overhead costs) etc
170
Q

UK firms are locked

A
  • Top UK firms are facing £5.4bn delayed payments from clients and costs associated with moving to new offices
  • Lock up period gap (gap between the lawyer issuing the invoice and the invoice being paid)
  • Average lockup time for the top 100 law firm is 124 days
  • Why: economic climate (clients are trying to manage their own cashflow by paying invoices more slowly), office moves due to hybrid working (often have to pay rent in both places for a while) + maintaining a relationship (don’t want to damage relationships with clients)
171
Q

Ocado

A
  • UK listed grocery / tech company is considering moving its stock listing from London to NY
  • Believes it could achieve a higher valuation in the US
  • Ocado’s CEO expressed frustrations with UK investors viewing the company as more of an online supermarket than a tech firm
  • Wider trend of UK companies exploring options of listing abroad
172
Q

Stocks are disappearing

A
  • Companies are delisting from the London Stock Exchange
  • Why: some believe they can raise more money as private (eg RedX a biotech company), high compliance costs (have ongoing disclosure and reporting obligations eg Superdry) + perceived undervaluation (Shell’s CEO believes it is undervalued)
  • Delisting threats the city’s reputation as a financial hub
173
Q

JD aquistion

A
  • Buying Hibbett Sporting Goods for $1.1bn
  • Hibbett will stop being a publicly traded company
  • Why: JD wants more stores (especially in the South East of the USA where it doesn’t have many), financial sense (JD sports anticipates at least £20m in cost savings following the deal) + cultural fit (both companies have a similar customer base)
174
Q

Liquidity

A
  • The efficiency or ease with which an asset or security can be converted into ready cash without effecting its market price
  • The more liquid an asset is, the easier and more efficient it is to turn back into cash
  • Cash is the most liquid of assets
175
Q

Funds

A
  • A fund is a pool of money that is allocated for a specific purpose
  • The pool of money is often invested and professionally managed in order to generate returns for investors
176
Q

FDI

A
  • Foreign direct investment
  • An ownership stake in a foreign company or project made by an investor, company, or government from another country
  • Key element in international economic integration because it creates stable and long lasting links between economies
177
Q

IMF

A
  • International monetary fund
  • International organisation that promotes global economic growth and financial stability, encourages international trade, and reduces poverty
177
Q

Economic growth

A
  • Increase in the production of economic goods and services in one period of time
  • Tax cuts are generally less effective in spurring economic growth than increased in government spending are
178
Q

Private credit funds

A
  • Non-bank lenders usually managed by investment firms
179
Q

Advantages of private credit funds

A
  • Become more popular due to:
    1. Less regulated than banks, which means they can lend on riskier deals that banks aren’t able to
    2. They are able to move faster than banks, which always helps when they are trying to get a deal over the line
180
Q

Disadvantage of private credit funds

A
  • They are more expensive than traditional banks
181
Q

Client base

A
  • A firm’s core group of customers who drive revenues and profits
  • Developing, retaining and expanding its client base is a key business goal
  • A client base can be generalised or targeted depending on a type of business or product
182
Q

ECB

A
  • European Central Bank
  • The central bank of the EU and the Eurozone currency union (19 countries)
  • Primary mandate is price stability (targets 2% inflation over the medium term as a buffer against the risk of destabilising deflation)
183
Q

Why is some inflation good?

A
  • Slowly increasing price level keeps business profitable and prevents consumers from waiting for lower prices before making purchases
184
Q

What is inflation?

A
  • Gradual loss of purchasing power reflected in a broad rise in prices for goods and services over time
  • Average price increase
185
Q

Why is high inflation bad?

A
  • Signals a move towards rising prices, escalating risk of layoffs and decreasing purchasing power
  • Consumers trying to make large purchases may be prices out of the market when inflation is high
186
Q

What causes inflation?

A
  • The result of an increase in the money supply due to government spending
  • The result of increased demand or a shortage of consumer goods (following COVID-19 pandemic)
187
Q

Capital gains tax

A
  • capital gains tax is a tax imposed on the sale of an asset
  • Capital gains taxes apply only to capital assets, which include stocks, bonds, digital assets like cryptocurrencies and NFTs, jewelry, coin collections, and real estate.

For individuals: 10% and 20%
(Budget = 18% and 24%)

188
Q

Unicorn investment

A

Privately owned company with a value exceeding $1bn
Eg Airbnb

189
Q

Market gap

A

An area that businesses don’t currently serve but there is a market for
Eg long-lasting EV vehicles

190
Q

Parent company

A

Single company that has a controlling interest in another company or companies
Eg Johnson and Johnson

191
Q

economies of scale

A

Cost advantages when companies become more efficient
Larger companies will have cost savings due to higher production
Eg better deals for technology, factories, investment into machinery

192
Q

Material adverse clause

A

(MAE)
- An escape door for the contract if something huge and changes everything
- Typically not applied based on market conditions, epidemics, wards, disasters etc
- Eg not held up for the case of Sibanye-Stillwater (buyer) v Appian Capital (Seller + PE firm)

193
Q

Non-compete clause

A

Legal agreement or clause in a contract specifying that an employee must not enter into competition with an employer after the employment period is over

194
Q

Non-solicit clause

A

Slightly weaker and less restrictive than a non-compete clause (not required to contain a geographic area or apply to one product of service)

195
Q

Entire agreement clause

A

States that the whole of the contractual relationship between the parties is governed exclusively by the terms set out in the parties’ written contract

196
Q

Change of control clause

A
  • Entitles the employee to a specified payment or enhanced notice period if their employer is taken over
  • They can terminate the agreement
  • Basically a get out of jail free card

Law: key words (7 decks)

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