Straight Talk
Our set of A-Z legal jargon busters will help your business know exactly where it stands.
A is for…
AGM
This stands for annual general meeting, a yearly meeting of the shareholders/members of a company. Matters dealt with at AGMs include reporting on the previous year’s events and holding elections for directors.
B is for…
Bankruptcy
A legal status of a person who can’t repay their debts to creditors. Bankruptcy is imposed by a court order, which is often initiated by the person or business who is owed money.
C is for…
Collective agreement
This is an agreement that is negotiated with a trade union or other employee representative, affecting the terms of a number of employees’ contracts.
D is for…
Due diligence
A detailed investigation of a business, or aspects of a business, which is carried out by one or more parties before they legally commit themselves to a transaction or contract.
E is for…
Early conciliation
A process where the Advisory, Conciliation and Arbitration Service (ACAS) tries to resolve a dispute between a staff member and their employer before the dispute is brought to the Employment Tribunal.
F is for…
Financial covenant
A contractual undertaking (promise) given by a borrower to a lender. For example, that the borrower will keep its debt below a certain amount.
G is for…
Garden leave
This usually applies during a senior staff member’s notice period. They are kept employed on full pay but do not work, have no access to company information, and cannot work for anyone else.
H is for…
High Court
A court for claims between individuals or companies. It can hear high-value claims for the first time, or appeals against most claims that have already been heard in the County Court.
I is for…
Incorporation
The legal process of forming a company.
J is for…
Joint venture
A business collaboration between two or more parties, usually formed through either a written agreement or a new company in which the parties invest as shareholders.
K is for…
Key person insurance
An insurance policy taken out by a business to cover financial losses arising from the extended incapacity or death of a key employee.
L is for…
Limited liability
This refers to the restricted liability of members of a limited company. They aren’t liable to pay the company any more than the amount unpaid on their shares (unless other circumstances apply, eg they have provided a personal guarantee).
M is for…
Mortgage
A loan (usually to an individual or individuals) to purchase a property, in which the property itself is the security for the loan.
N is for…
Non-disclosure agreement
Also called an NDA or confidentiality agreement, this is an agreement between parties to keep confidential information safe. It can be either one-way (only one party agrees not to disclose confidential information) or mutual (all parties agree not to disclose confidential information).
O is for…
Ordinary partnership
A business arrangement where two or more people carry on a business together with the aim of making a profit.
P is for…
Prospectus
A detailed document approved by the Financial Conducts Authority (FCA), setting out the terms on which new shares are to be offered to the public and providing details about the company offering shares.
Q is for…
Qualifying pension scheme
A pension scheme that meets the strict legal requirements for use as an automatic enrolment pension scheme. Not all pension schemes meet these requirements; consult your pensions provider for more information about your particular scheme.
R is for…
Redundancy
When a staff member is dismissed because their role is no longer needed. You need to follow a proper process if you’re making any staff redundant.
S is for…
Share certificate
A certificate which a shareholder in a company is entitled to receive, evidencing ownership of the shares they hold.
T is for…
Tag-along right
The right of a shareholder to require his shares to be sold if an offer is made to a certain percentage of the other shareholders. If this right applies, the offer must be made on the same terms to all shareholders.
U is for…
Unfair dismissal
When an employee is dismissed without good reason or without following the proper procedure. Tribunal awards for unfair dismissal are up to one year’s gross pay, currently capped at £115,115 (unless certain exceptions apply).
V is for…
Voting rights
Rights attached to shares which allow a member to vote on resolutions. For most companies, at meetings of shareholders each member will have one vote per share if voting on a poll but only one vote in total if voting on a show of hands.
W is for…
Whistleblower
An individual who discloses information, usually about wrongdoing within a business, that he reasonably believes is in the public interest. For example, if a crime has been committed or someone’s health and safety has been endangered.
X is for…
eXecution
The formal completion of a document.
Y is for…
tax Year
A 12 month period to be used when dealing with business and employment tax matters. The UK tax year starts on 6 April each year and ends on 5 April the following year.
Z is for…
Zero hour contract
An agreement for a person to work on an as required basis under which the hirer has no obligation to offer any work.