Word of the day Flashcards
Fiduciary
person who holds a legal or ethical relationship of trust with one or more other parties
Ratification
act of giving formal consent to a treaty, agreement, contract, or other legal instrument
Vicarious Liability
When a principal is responsible got the actionable conduct of their agent based on the relationship between the 2 parties
Duty of Loyalty
A persons responsibility to act in the best interests of another
Agency
A consentual relationship where one party, the principal, grants authority for another party, the agent, to act on behalf of andunder the control of the principal to deal with a 3rd party
Partnership Agreement
the agreement among partners of a partnership governing their relative rights and obligations among one another with respect to the partnership
Capital Account
general ledger account that is used to record the owners contributed capital and retained earnings- the cumulative amount of a companies earnings since it was formed minus that cumulative dividens paid to the shareholders
Indemnification
the broad concept of one party
compensating another for losses, damages, or liabilities, usually due to third-party claims. It’s an agreement that safeguards one party against
the financial impacts of specific actions or events
Common Law
law that is derived from judicial decisions instead of from statutes or regulations
Bankrupcy
In the US, this is a federal court process conducted under the provisions of ch 7, 11, 12, 13, or 15 of the bankrupcy code. The process may result in liquidation or reorganization
Certificate of Limited Partnership
A certificate filed with a state office or agency for the purpose of forming a limited partnership under the laws of that state
Pass through taxation
A type of taxation, generally applicable to partnerships and LLCs, whereby the business entity is not taxed on its income. but, instead the income is “passed through” to its stakeholders. Partnerships are not subject to entity-level taxation ____(evenly?) is passed through the partnership directly to its partners, who are taxed individually.
Bylaws
one of the primary governing documents (second to the certificate of incorperation) for a corporation, in which most of the rules for the day to day operations of a corperation are set forth. Bylaws typically are selected how Board members may be appointed, how Board meetings and stockholder meetings may be called/conducted
Enviromental, social, and governance/ ESG
the three factors that are considered by and increasing number of businesses, investors, and other stakeholders (alongside more traditional factos) in a variety of decision-making.
- Examples of ESG considerstions include a company’s sustainablity policies, approach to supply chains and ensuring supply chain resilience (including modern slavery issues), labor policies, and governance issues (such as board diversity, reporting systems and processes and good Corperate Governance).
Shareholders Meeting
The meeting of a company’s shareholders held on an annual or special basis as applicable to elect directors, vote on corporate matters, (eg, a merger or other combination), and to ratify certain management actions
Subsidiary
A company that is owned by another company, which is the subsidiary’s parent entity
Duty of care
Objective “reasonable man” standard that in making a member of the Board of Directors must use the same degree of care as a reasonable business person would do in the conduct of his/her own business affairs. Directors clearly have an obligation to understand the situation and relevant facts, laws, etc., but in doing so are entitled to rely on officers and other directors of the corporation and on advisors whom they reasonably believe are knowledgeable in the area
Word of day
The entity that enters into an asset purchase agreement with the prior to the auction, creating the entity “offer to beat.” Typically a stalking horse bidder will receive in exchange for auction, a breakup fee and expense reimbursement in the ___ is outbid
Executive Compensation Plan
Plan or agreement negotiated between an employer and executive level employees that often provides, base salary, bonuses, long term equity incentives, severance plan, and additional executive-only benefits
Tag along rights
The contractual rights of a minority stockholder to be included in (or to tag along in) a transaction where the majority stockholder is selling its interests to a 3rd party
- also referred to as co-sale rights
Indemnification agreement
An agreement in which a company agrees to indemnify its directors and officers for actions is taken in their capacity as such in order to reduce the potential for personal liability
Squeeze out merger
A merger or other transaction that eliminates minority shareholders in a company for cash, resulting in the majority shareholder becoming the sole owner of the company. Squeeze out mergers may, but do not always take the form of short form mergers
Limited Liability company
- a type of company and organizational form that combines many of the attributes of a corporation with attributes of a Partnership. Like corporations, the Equity holders in a Limited Liability Company (called members) generally do not have personal liability for the company’s liabilities and obligations. Like Partnerships (and untike corporations), Limited Liability Companies are by default pass-through entities for tax purposes (although they can elect to be taxed like taxable corporations) and can by agreement decide on what rules the company must follow, including whether or not the Directors (called managers) have Fiduciary Duties to the members.
Good Faith
acting honestly and fairly towards one’s counterparties. Similar to acting reasonably. Good Faith is also a critical component of Duty of Loyalty.
