Business law
13 Abbreviations that you will hear ALL THE TIME when entering the investment and startup world
Jargons & abbreviations you can´t avoid when in the investment, startup and M&A sector, so lets get a grip on what they mean!
Abbreviations and business
The business meets business law area is heavily occupied with abbreviations. And in my experience there will almost always one person in the room who does not know what the abbreviation stands for, and that is not comfortable to ask for an explanation. This creates irritation, a risk for misunderstandings and lower quality meetings and hence final decisions. It also, in worst cases, increases the risk for conflicts later on if lingo has been used that has made it hard for all parties concerned to grasp all aspects of the issue.
So here is a list for you to check through in case you have question marks today or just to make yourself ready for the next discussion with an investor, a board member or founder.
Top 13 abbreviations you will hear in the startup, M&A and investment world
1. NDA - non disclosure agreement
An agreement regulating the confidentiality of information that is to be shared between two (or more) parties.
2. LOI / TS - Letter of intent / term sheet
A non-binding initial agreement between two parties that outlines the major terms and conditions for their contemplated deal. Does typically include some binding sections such as e.g. confidentiality, exclusivity, a break up fee etc.
3. SPA - Share purchase agreement
The final (often comprehensive) agreement whereas a buyer buys and a seller sells all of the shares in a company. (It can also refer to a minor transaction of some shares but then it is not typically refered to as a SPA, instead it is often called a contract note).
4. SHA - Shareholders agreement
An agreement between the shareholders of a company that regulates the main aspects of the parties´ relationship with each other and the company. It will cover both economic and control rights, transfer of the shares, potentially issues such as non-compete for founders and other active shareholders etc.
5. CP - Conditions president
These are conditions that must be fullfilled before the closing of a deal (typically an investment or an M&A).
6. BoD - Board of directors
7. AGM - Annual general meeting
The yearly mandatory general meeting of the shareholders where specific matters need to be addressed such as approving the annual accounts of the company.
8. EGM - Extra general meeting
Any extraordinary general meeting of the shareholders of the company other than the AGM, such meetings are often convened ad hoc when needed because the company wants to decide in a matter/ change something that only the shareholders of the company have the authority to decide (for example changing the articles of association or decide to issue new shares/mandate the board to issue new shares).
9. AoA - Articles of association
The fundamental statutes of the company that must have certain information re. the company in them, and that are registered with the Companies Registration Office (and that are public).
10. Liq Pref - Liquidation preference
A right to get proceeds before other shareholders in a liquidity event (dividends, sale of the company, liquidation of the company, bankruptcy).
11. RoFR - Right of first refusal
A right to be offered to "step into" a deal and become the buyer instead of a third party (typically in relation to a right to get the option to buy shares in a company where you are already a shareholder, before anyone else gets to buy them).
12. DD - Due diligence
The investigation of a company from various aspects such as finance, legal and commercial.
13. M&A - Mergers and acquisitions
Transactions where companies are bought, sold or companies merge with each other.
End note
There are no stupid questions - what is stupid is if us lawyers/finance people keep on talking in terms and using abbreviations that makes it hard for a first time founder, or first time seller of a company, to follow in the discussions or negotiations. So better to ask, and make us aware if we are running to fast with our lingo.
London, 2024-08-13
Author: Kat Strandberg
Contact: Kat@stgcommerciallaw.com
Abbreviations and business
The business meets business law area is heavily occupied with abbreviations. And in my experience there will almost always one person in the room who does not know what the abbreviation stands for, and that is not comfortable to ask for an explanation. This creates irritation, a risk for misunderstandings and lower quality meetings and hence final decisions. It also, in worst cases, increases the risk for conflicts later on if lingo has been used that has made it hard for all parties concerned to grasp all aspects of the issue.
So here is a list for you to check through in case you have question marks today or just to make yourself ready for the next discussion with an investor, a board member or founder.
Top 13 abbreviations you will hear in the startup, M&A and investment world
1. NDA - non disclosure agreement
An agreement regulating the confidentiality of information that is to be shared between two (or more) parties.
2. LOI / TS - Letter of intent / term sheet
A non-binding initial agreement between two parties that outlines the major terms and conditions for their contemplated deal. Does typically include some binding sections such as e.g. confidentiality, exclusivity, a break up fee etc.
3. SPA - Share purchase agreement
The final (often comprehensive) agreement whereas a buyer buys and a seller sells all of the shares in a company. (It can also refer to a minor transaction of some shares but then it is not typically refered to as a SPA, instead it is often called a contract note).
4. SHA - Shareholders agreement
An agreement between the shareholders of a company that regulates the main aspects of the parties´ relationship with each other and the company. It will cover both economic and control rights, transfer of the shares, potentially issues such as non-compete for founders and other active shareholders etc.
5. CP - Conditions president
These are conditions that must be fullfilled before the closing of a deal (typically an investment or an M&A).
6. BoD - Board of directors
7. AGM - Annual general meeting
The yearly mandatory general meeting of the shareholders where specific matters need to be addressed such as approving the annual accounts of the company.
8. EGM - Extra general meeting
Any extraordinary general meeting of the shareholders of the company other than the AGM, such meetings are often convened ad hoc when needed because the company wants to decide in a matter/ change something that only the shareholders of the company have the authority to decide (for example changing the articles of association or decide to issue new shares/mandate the board to issue new shares).
9. AoA - Articles of association
The fundamental statutes of the company that must have certain information re. the company in them, and that are registered with the Companies Registration Office (and that are public).
10. Liq Pref - Liquidation preference
A right to get proceeds before other shareholders in a liquidity event (dividends, sale of the company, liquidation of the company, bankruptcy).
11. RoFR - Right of first refusal
A right to be offered to "step into" a deal and become the buyer instead of a third party (typically in relation to a right to get the option to buy shares in a company where you are already a shareholder, before anyone else gets to buy them).
12. DD - Due diligence
The investigation of a company from various aspects such as finance, legal and commercial.
13. M&A - Mergers and acquisitions
Transactions where companies are bought, sold or companies merge with each other.
End note
There are no stupid questions - what is stupid is if us lawyers/finance people keep on talking in terms and using abbreviations that makes it hard for a first time founder, or first time seller of a company, to follow in the discussions or negotiations. So better to ask, and make us aware if we are running to fast with our lingo.
London, 2024-08-13
Author: Kat Strandberg
Contact: Kat@stgcommerciallaw.com