Glossary

50 terms, defined plainly.

409A valuation: An independent valuation of a US private company's common stock used to set the exercise price of options so that they are not treated as deferred compensation under section 409A of the Internal Revenue Code.
83(b) election: A filing with the US Internal Revenue Service within 30 days of receiving restricted stock, electing to be taxed on its value at grant rather than as it vests. The deadline cannot be extended.
Acceleration: A provision that causes unvested equity to vest early on an event, usually a sale of the company (single trigger) or a sale followed by loss of employment (double trigger).
Apostille: A certificate under the Hague Apostille Convention that authenticates a public document (such as a notarised power of attorney) for use in another member country. Taiwan is not a party, so documents for Taiwan are authenticated through its overseas offices.
Arbitration seat: The legal home of an arbitration, whose courts supervise the process and whose law governs the award's validity. Singapore, Hong Kong and London are common seats for cross-border contracts in the LegalMatrix jurisdictions.
Cliff: The initial period of a vesting schedule during which nothing vests; at the end of the cliff a block vests at once. A one-year cliff means an employee who leaves before the anniversary receives nothing.
Condition precedent: A requirement that must be satisfied before a contract, or a step under it such as completion, takes effect. Regulatory approvals and shareholder waivers are typical conditions in share transfers.
Constitution: The document that sets a company's internal rules, called articles of association, memorandum and articles, bylaws or certificate of incorporation depending on the jurisdiction. It binds the company and all members, present and future.
Deadlock: A situation where shareholders or directors with equal votes cannot reach a decision. Shareholders' agreements provide escalation, mediation, casting votes or buy-sell mechanisms to resolve it.
Deed: In common law jurisdictions, a document executed with extra formality (witnessing for individuals, prescribed signatory combinations for companies) that is binding without consideration and carries a longer limitation period. Used for assignments, guarantees and trusts.
Digital signature: A particular kind of electronic signature backed by a certificate from a certification authority, using cryptography to verify the signer and detect alteration. Required for government dealings in Hong Kong and presumed authentic in Taiwan and Japan.
Drag-along: A right allowing shareholders holding a set percentage to require the others to sell their shares to a buyer on the same terms, so that a minority cannot block an exit.
E-signature: An electronic method of signing that identifies the signatory and indicates their intention. Valid for most documents in all ten LegalMatrix jurisdictions under statutes such as Singapore's Electronic Transactions Act and the EU eIDAS Regulation, with specific exclusions.
EMI: Enterprise Management Incentive: a UK tax-advantaged option scheme for qualifying smaller companies, with limits on gross assets, headcount and option value, an HMRC-agreed valuation and a notification deadline.
Entire agreement clause: A clause stating that the written contract is the whole agreement and supersedes prior discussions, which limits claims based on pre-contract statements.
ESOP: Employee share option plan: the plan rules and grant documents under which a company grants options or shares to employees. In the United States the term means a specific tax-qualified retirement plan, and start-ups use an equity incentive plan instead.
Garden leave: A period during notice when the employee remains employed and paid but is required to stay away from work, customers and colleagues. Enforceable because the employee suffers no loss, and more reliable than a non-compete.
Good leaver / bad leaver: Categories in equity documents that determine what a departing shareholder-employee keeps and at what price. Good leavers (death, disability, redundancy, retirement) typically keep vested equity at fair value; bad leavers (dismissal for cause, breach, competing) may lose it or receive the lower of cost and fair value.
Governing law: The system of law the parties choose to interpret and enforce their contract. It does not displace mandatory rules of the place where a party is based or an employee works.
Growth share: A class of share that participates only in value above a hurdle set at issue, used in the United Kingdom and elsewhere to give executives a share of future growth with a low initial value.
Indemnity: A promise to compensate the other party for a defined loss, pound for pound, without the other party having to prove breach or mitigate in the usual way. Common for IP infringement, third-party claims and tax.
Jurisdiction clause: The clause that names the courts (exclusive or non-exclusive) in which disputes under the contract may be brought. An arbitration clause does the same job for arbitration and names a seat and rules instead.
Licence vs assignment: An assignment transfers ownership of intellectual property outright; a licence grants permission to use it while ownership stays with the licensor. Only an assignment moves the asset into a holding company; a licence moves the right to use it to an operating company.
Limitation of liability: A clause that caps the amount a party can recover, excludes types of loss (indirect, consequential, loss of profit) and carves out matters that cannot be limited, such as fraud or, in some jurisdictions, death and personal injury.
Madrid Protocol: The WIPO treaty allowing one international trade mark application based on a home filing to designate many member countries. Taiwan is not a member and Hong Kong was not covered at the review date; Malta is reached through the EU trade mark.
Moral rights: An author's personal rights to be identified as author and to object to derogatory treatment of the work. They cannot be assigned; common law jurisdictions allow waiver or consent, civil law jurisdictions allow an agreement not to exercise them.
Nice Classification: The international system of 45 classes (34 for goods, 11 for services) used to specify what a trade mark covers. Fees are charged per class in all ten LegalMatrix jurisdictions.
Non-compete: A post-employment restraint preventing the employee from working for a competitor for a period. Void in California, prohibited for most employees in Ontario, conditional on paid compensation in Taiwan, and enforceable elsewhere only if reasonable.
Non-solicitation: A restraint preventing a former employee from approaching the employer's customers or staff for a period. Judged more leniently than a non-compete and enforced in most jurisdictions when limited in time and scope.
Notarisation: Certification by a notary that a signature is genuine or a copy is true. Required for some corporate filings abroad and for public deeds in civil law jurisdictions such as Malta.
Notice period: The period of warning that either party must give to end employment, set by contract subject to statutory minimums that scale with service in most LegalMatrix jurisdictions. Payment in lieu of notice is usually permitted.
Opposition: A procedure allowing third parties to object to a trade mark application after publication (or, in Japan and Taiwan, after registration) within a set window: 30 days in the United States, two months in Singapore, the United Kingdom, Canada and Australia, three months in Hong Kong, New Zealand and Taiwan, 90 days in Malta.
Option: A right to buy shares at a fixed exercise price during a defined period. Employee options are granted under a plan and vest before they can be exercised.
Pre-emption right: The right of existing shareholders to be offered new shares (on an issue) or a departing shareholder's shares (on a transfer) before outsiders. Statutory on issues for cash in the United Kingdom and common in constitutions everywhere.
Priority date: The date of a first trade mark filing in a Paris Convention or WTO member. Filings in other members within six months can claim that date, so later third-party filings in between do not defeat them.
Probation: An initial period of employment during which performance is assessed. Its legal effect varies: no change to statutory protections in Singapore, a no-notice first month in Hong Kong, a 90-day trial with no unjustified-dismissal claim in New Zealand, and a statutory default of six months in Malta.
Representation: A statement that induces a party to enter the contract. Unlike a warranty, a false representation can allow the contract to be rescinded, which is why many agreements exclude reliance on representations outside the document.
Reserved matters: Decisions that the shareholders' agreement removes from the board's sole authority and requires shareholder or supermajority consent for, such as issuing shares, borrowing above a threshold or changing the business.
Restricted stock: Shares issued now but subject to forfeiture or buy-back at cost if vesting conditions are not met. Used for founders and early executives when the share value is low.
Right of first refusal: A transfer restriction requiring a selling shareholder to offer shares to the company or other shareholders at the price a third party has offered before selling to that third party.
RSU: Restricted stock unit: a promise to deliver shares (or cash) on vesting, with no shares issued and no exercise price. Common in larger companies and in jurisdictions where options are tax-inefficient.
Secondment: An arrangement under which an employee works for another organisation (usually a group company) for a period while remaining employed by the home employer, documented by an intercompany agreement and a letter to the employee.
Section 431 election: A joint election by a UK employee and employer, within 14 days of acquiring restricted shares, to be taxed at acquisition on the unrestricted value so that future growth is capital rather than employment income.
Settlor: The person who creates a trust by transferring assets to the trustee under a trust deed. The settlor may also be a beneficiary or protector, subject to tax and asset-protection consequences.
Shareholders' agreement: A private contract between the shareholders of a company (and usually the company) governing control, transfers, reserved matters and exits. It binds only the signatories, so key terms are mirrored in the constitution.
Tag-along: A right allowing minority shareholders to join a sale by the majority on the same terms, so that they are not left behind with a new controller.
Trustee and protector: The trustee holds legal title to trust assets and administers them under the deed for the beneficiaries. The protector is an optional supervisor with defined powers, typically to remove and appoint trustees and consent to major decisions.
Vesting: The process by which an employee or founder earns the right to equity over time or on performance, so that leaving early forfeits the unearned part. Four years with a one-year cliff is a common schedule.
Warranty: A statement of fact in a contract that, if untrue, gives the other party a claim for damages measured by the loss the untruth caused. Warranties are usually qualified by disclosure and limited in time and amount.
Work for hire / employee works: The rule that intellectual property created by an employee in the course of employment belongs to the employer. It does not cover founders' pre-incorporation work or contractors, who must assign expressly.