Glossary

A · B · C · D · E · F · G · H · I · L · M · N · O · P · Q · R · S · T · U · V · W

A

Advance subscription agreement

Money paid now for shares to be issued later, at a price the next priced round will set. It is not a loan and must not look like one — no interest, no maturity, no security, and not repayable in any circumstances — because the whole point is that it is equity waiting to happen. Solaris raised €500,000 on three of them in March 2021, capped at a €2,000,000 pre-money valuation with a 20% discount. Appendix 1, para 3 · Chapter 3

Allotment and transfer

The two ways a person comes to hold shares, and they are not the same event. An allotment creates new shares and the money goes to the company; a transfer moves existing shares between people and the money goes to the seller. Both end in the same place — an entry in the register of members — and the company files a return of allotment with the registrar for the first but not the second. Clause 6 · Chapter 2

Amended and restated

A way of varying an agreement that produces one clean consolidated document rather than a first agreement plus a stack of side letters. The Investment Agreement you read in this course is the 2 May 2022 original as amended and restated on 30 June 2023 — the Series B insertions are marked, so you can see which words arrived a year late. Chapter 13

Anti-dilution

A protection for an existing preference class when the company later issues shares more cheaply than that class paid. It does not hand anyone new shares on the day; it lowers the class's conversion price, so each preference share will convert into more ordinary shares whenever conversion finally happens. Article 7 · Chapter 13

As converted

Counting preference shares at the number of ordinary shares they would become rather than at their face count. It matters because the Constitution gives each preference share the votes its converted ordinary shares would carry, so after the Series A adjustment Solaris's 260,000 A shares voted 325,000 — which is why Meridian held 52.31% of the register as issued but 53.48% of the register as converted. Article 8.2 · Chapter 13

As-converted election

A preference class's right, on a liquidation event, to give up its Preference Amount and take its share of the proceeds as if the class had converted into ordinary shares. It is not an individual right: holders of more than 50% in nominal value of the class elect by written notice given before the Liquidation Event completes, and the election binds every share of the class, while a class which does not elect keeps its Preference Amount whatever another class does. It is what makes a 1× non-participating preference honest — the class takes the better of the two, and at a good price every class elects to convert. Article 5.2 · Chapter 9

B

Bad leaver

A departing founder or employee who left in circumstances the documents treat harshly — dismissal for cause, resignation before the agreed time, breach of the restrictive covenants. All their shares, vested and unvested alike, go to compulsory transfer at the lower of fair value and what they paid, and their options lapse. Schedule 6, para 3 · Chapter 5

Basket and de minimis

Two thresholds that keep small warranty claims out of the system. A claim below the de minimis (€10,000 here) does not count at all; claims that clear it must add up to the basket (€75,000) before anyone can recover anything. Together they mean a warranty is a remedy for real problems, not for rounding. Clause 9.3 · Chapter 10

Beneficial owner

The person who really owns or controls a holding, behind whatever name sits on the register — for most financial-regulation purposes, someone holding more than 25% of the shares or voting rights, measured on the issued register and never on a fully diluted count — which is why Meridian's 2022 number was its 28.57% of the register and not its 25.00% fully diluted. This is the concept the Irish virtual asset service provider regime used, and so it is the right vocabulary for the Series A in 2022 and the Series B in 2023. Chapter 10

Bonus issue

New shares issued to existing holders for no fresh cash, paid up by capitalising a reserve the company already has. Solaris's last act was one: €84,350 of share premium capitalised to pay up 84,350 new €1.00 shares, taking the register from 15,650 shares to exactly 100,000. Deed of Exchange, resolution 3 · Chapter 15

Bridge

Money raised to carry a company from where it is to the round it hopes to raise — usually convertible, usually quick, usually from people already on the register. A bridge that reaches the far bank converts into the next round; one that does not becomes a negotiation. Chapter 4

Broad-based weighted average

The usual anti-dilution formula, and the gentlest of the family: the new conversion price is the old one adjusted by how much cheap money came in relative to the whole capital already there. Broad-based means the denominator includes the option pool and everything else outstanding; a narrow-based version counts fewer shares and so bites harder in the holder's favour. On the Series B it moved the A class from €10.00 to exactly €8.00. Article 7.2 · Chapter 13

Buy-back

The company purchasing its own shares from a holder, which needs distributable profits or a statutory solvency route and always needs care. On the Founder Settlement it was available and was rejected: Solaris had no distributable profits and a Central Bank application pending, so the leaver's shares moved to the employee trust by negotiated transfer instead. Chapter 5

C

Cap (warranty cap)

The ceiling on what a warrantor can be made to pay. On a venture round the company's cap is usually the money it just received and the founders' a fraction of their own shareholdings — €400,000 in aggregate here, and on one founder only, Elena Marsh having been the only one giving warranties by the Series A and Cormac Duffy having given none. It is the number to hold in mind whenever you wonder why investors rely on process rather than on warranties. Clause 9.1 · Chapter 10

Cap Base

The agreed share count a valuation cap is divided by to produce a price — also called the cap capitalisation. Fixing it in the term sheet is what stops the conversion arithmetic chasing its own tail: Solaris's Cap Base was 400,000 — the 300,000 shares in issue plus the newly reserved 100,000 option pool — and every cap price in the Series A falls out of it. Schedule 3 · Chapter 7

Cap price and discount price

The two candidate conversion prices for a convertible instrument: the cap price is the valuation cap divided by the Cap Base, and the discount price is the round price less the agreed discount. The holder converts at the lower of the two. On Solaris's Series A the advance subscriptions converted at the €5.00 cap price and the notes at the €8.00 discount price, so one instrument's cap bit and the other's was decoration. Schedule 3, para 1 · Chapter 8

Cap table

The list of who owns what, in shares and in percentages, at a given moment. It is not a legal document and it decides nothing — the register of members does that — but it is how everyone actually thinks about a company, and every chapter of this course opens and closes with one. The Cap Table Record · Chapter 1

Capitalisation of reserves

Moving a sum out of a reserve such as the share premium account and into share capital, so it pays up shares issued for no new money. It relabels money the company already had; total shareholders' funds do not change by a cent. Solaris did it twice on one day — €650 for the anti-dilution shares and €84,350 for the bonus issue. Article 3.2 · Chapter 15

Change of control

Someone new acquiring control of the company, which is the trigger for a great many rights sitting quietly in contracts. Convertible notes often carry a multiple on it — Solaris's paid 2× if a sale came before conversion — so that a company sold before the noteholders got their equity does not leave them holding a bare debt at par. Chapter 4

Class consent

The separate approval a class of shares must give before its own rights are varied or abrogated — here, 75% in nominal value of that class or a special resolution of a class meeting. It is the protection that makes a preference class a class rather than a wish, and its timing decides deals: the 2025 consents had to be taken while the classes still existed. Article 9.1 · Chapter 9

Cliff

The period at the start of a vesting schedule during which nothing vests at all, after which a whole block vests at once — classically twelve months of a four-year schedule. Solaris's founder settlement was signed on 31 March 2022 and the cliff fell on 1 April 2022, which is a lesson in reading a date carefully. Schedule 6, para 1 · Chapter 5

Completion

The day the money moves, the shares are allotted and the register is written up — as distinct from the day the documents are signed. On a venture round the two are usually days or weeks apart, and the gap exists because conditions have to be satisfied first. Clause 6 · Chapter 10

Completion bible

The bound (now usually electronic) set of everything executed on a transaction, indexed and dated. Unglamorous and enormously valuable: four years later a diligence team reads your bible rather than your memory, and the gaps in it become their findings. Chapter 10

Composite transaction

Several steps effected by one deed on one day and expressed to take effect as a single transaction, so that the law and the regulator look at the two ends rather than at each rung. Solaris's Exchange and Reorganisation of 30 September 2025 is one, which is why the intermediate percentages inside it were never anybody's holding. Deed of Exchange, clause 1 · Chapter 15

Compulsory transfer

An article of the constitution obliging a shareholder to sell — most often a leaver, at a price the article sets. It is the machinery without which vesting is only a promise: Solaris's original constitution had no such article, so a departing co-founder's shares simply stayed his, and that cost real money. Article 16 · Chapter 5

Condition

Something that must happen before completion is allowed to happen — the parties sign, then wait. On both Solaris rounds the condition was regulatory: a notification to the Central Bank of Ireland and a fitness-and-probity assessment of the incoming investor and its proposed director. Clause 5.1 · Chapter 10

Consent matters

The list of things the company may not do without the investors' agreement — issuing shares, borrowing, selling the business, changing the constitution, paying related parties. A minority investor's real power lives here rather than in its percentage, and a request deemed given after a stated period keeps the list from becoming a veto by inertia. Schedule 5 · Clause 14.2 · Chapter 11

Consolidation

Combining several shares into one of a larger nominal value — here every 100 ordinary shares of €0.01 into one of €1.00. Nothing is gained or lost: 1,565,000 shares became 15,650, the nominal capital stayed at €15,650, and everyone owned exactly the same proportion of the same company. Deed of Exchange, resolution 2 · Chapter 15

Constitution

The company's own rulebook — articles in England, a constitution in Ireland — and the only place where share rights, transfer restrictions and leaver provisions bind the company itself. A promise in a shareholders' agreement that is not reflected here can be enforced between the people who signed it, but it will not stop the register moving. Schedule 8 · Chapter 9

Conversion

A convertible instrument or a preference share turning into ordinary shares. It is the moment the off-register money finally lands on the register, and every argument about caps, discounts, ratios and anti-dilution is really an argument about the number that appears here. Clause 4 · Chapter 8

Conversion price

The price used to work out how many ordinary shares a preference share becomes: divide the original issue price by the conversion price then in force. It starts equal to the issue price, so the ratio is 1:1, and anti-dilution works by pushing it down — the A class went to €8.00 and a ratio of 1.25. Article 6.2 · Chapter 9

Convertible loan note

Debt that expects to become equity: a single note instrument, executed as a deed poll by the company, under which each holder takes a note for its own principal amount and the company keeps a register of noteholders alongside its register of members. Interest usually rolls up rather than being paid, the maturity date is one nobody expects to reach, and conversion in the next qualifying round is automatic. Solaris's €800,000 instrument of November 2021 was unsecured, carried 8% simple interest cancelled on conversion, and could be varied by a noteholder majority — so no single holder could block the others. Appendix 2 · Chapter 4

D

Deed of adherence

The short deed by which a new shareholder signs up to the shareholders' agreement everyone else is already bound by. It is what stops the agreement leaking: no adherence, no registration of the transfer. Appendix 5 · Chapter 14

Dilution

Your percentage going down because the company issued more shares. It is not by itself a wrong or even a loss — a smaller slice of a much larger pie is the ordinary shape of a funded company — and the question worth asking is always what the company received in exchange. Chapter 7

Disclosure letter

The letter delivered with the warranties setting out what is actually true, warranty by warranty. A warranty is qualified by whatever is fairly disclosed — disclosed clearly enough for the reader to understand the point being made — so a disclosed problem is a known problem, not a claim. Clause 8.3 · Chapter 10

Discount

The percentage off the next round's price that a convertible investor gets for having come in early — 20% on both of Solaris's instruments. It rewards the risk of investing before there was a price at all, and it bites whenever the discount price comes out below the cap price. Compare prices, not valuations: on Solaris's notes the €8.00 discount price beat the €12.00 cap price even though the round valued the company above the €4,800,000 cap, because the cap price divides the cap by the fixed Cap Base of 400,000 while the round price divides the pre-money by every pre-money share. With a 20% discount a cap only starts to protect anyone once the round prices above 125% of the cap price. Definition: Discount · Chapter 3

Down round

A round priced below the last one. Solaris's Series B was at €5.00 against the Series A's €10.00 — exactly half — and it is where the protective clauses everyone negotiated in the good years finally do something: anti-dilution fires, pay-to-play sorts the investors, and the team's old options are under water. Chapter 13

Drag-along

The right of a stated majority to force everyone else to sell on the same terms, served by a drag notice, so a buyer wanting 100% can actually get it. Read the trigger with care: Solaris's original article permitted a drag only on an offer from an arm's length purchaser who was not a shareholder, which was precisely what the intended buyer was — so the article had to be amended, and amended first. Amending who may buy was only half of it: the amendment also had to recast the threshold — 75% in number of the shares then in issue — to exclude the offeror's own shares and those of anyone connected with it, or the majority could never have been counted. Article 15.1 · Article 15.2 · Schedule of Amendment · Chapter 14

E

Employee Trust

An employee benefit trust: a trust holding shares for the benefit of the group's employees and directors, used as a warehouse — shares bought back or given up by a leaver sit there until they are needed to satisfy options. Solaris's trust took 60,000 shares from the departing co-founder in 2022 and delivered them to option holders in 2025, and was then wound up. Article 17 · Chapter 12

Entrenchment

Writing a protection into the constitution rather than leaving it in a contract, so that it binds the company and everyone who later becomes a shareholder and can be removed only by special resolution — which a holder of more than 25% of the votes can block. It is stronger than a contractual promise, with one hard limit English law insists on: a company cannot contract out of its statutory power to alter its own articles, so entrenchment binds the shareholders' votes rather than the company. Article 22 · Chapter 11

ESOP

Employee share option plan — the American shorthand you will hear constantly in venture conversation for what the documents in this course call the Option Plan and the Option Pool. Worth knowing, worth not using in drafting, since it means different things in different countries. Appendix 4 · Chapter 12

Exclusivity

The founders' promise, in an otherwise non-binding term sheet, not to talk to anyone else for a stated period — sometimes papered as a standalone lock-out agreement. It is one of the few genuinely binding paragraphs, and its length should be sized to the real timetable: Solaris gave eight weeks because the regulatory step took about that long. Chapter 6

Exercise price

What an option holder pays per share when they exercise, fixed at grant and never below nominal value. Solaris granted at €4.00 in 2022 and at €2.00 after the down round, which is the only reason the team's options were ever worth anything. Appendix 4, para 4 · Chapter 12

Exit

The event everybody in a venture deal is quietly planning for: a sale of the company, a sale of its business, or a listing. It is the point at which paper becomes money, and most of what the documents do is decide who gets how much of it. Clause 20 · Chapter 1

Exit-only

Options that cannot be exercised until there is an exit, however long they have been vested. Common in Europe, and tidy: nobody becomes a minority shareholder by accident, and everything happens in one step when the sale comes. Only the vested part is exercisable, though: Solaris's sweep of all 260,000 options needed the board to accelerate every unvested one first, with the Investor Consent that rule 5 of the Option Plan and clause 7.4 both require, and nobody was obliged to give it. Chapter 12

F

Fair Value

The price a constitution reaches for when it needs one and the parties cannot agree — usually determined by an independent valuer acting as expert rather than arbitrator, at the company's cost, and binding. It appears in the pre-emption machinery and in the leaver articles, which is where most arguments about it actually happen. Article 13.2 · Chapter 14

Fitness and probity

The regulator's assessment of whether the people behind a regulated firm are competent, honest and financially sound. Under the Irish virtual asset service provider regime it was run on Solaris's incoming beneficial owner and on each proposed director, and it is the reason both rounds completed weeks after they were agreed. Clause 21 · Chapter 10

Founders' agreement

The document founders sign at the very beginning: who owns what, who does what, vesting, and assignment of intellectual property to the company. Solaris's promised both vesting and IP assignment; the IP promise was performed and the vesting promise never reached the constitution, so one held and one did not. Appendix 3 · Chapter 2

Full ratchet

The harshest anti-dilution formula: the earlier investor's conversion price simply drops to the new lower price, no matter how few shares were issued at it. Rare in Europe, and worth understanding mostly as the thing a weighted-average formula is a compromise against. Chapter 13

Fully diluted

The share count with everything counted that could become a share: the register plus the unissued option pool and, where the table says so, the shares that would arise on conversion. It is the basis for economics — what a holding is worth, what a round costs, every price per share — and it is never the basis for votes, control or a regulatory threshold. Definition: Fully Diluted · Chapter 7

G

Good leaver

A departing founder or employee who left in circumstances the documents treat kindly — ill health, death, redundancy, or simply going with everyone's blessing. They keep their vested shares and give up the unvested ones, which is the outcome the whole vesting apparatus exists to produce. Schedule 6, para 2 · Chapter 5

H

Heads of terms

The general name for a short document recording a deal's shape before the drafting starts. In venture the same animal is called a term sheet; the law about how binding it is, and about the English courts' refusal to enforce an agreement to negotiate in good faith, is the same either way. Chapter 6

I

Information rights

The investors' entitlement to see how the company is doing. The monthly management accounts, the board pack circulated before each meeting and the annual budget go only to a Reporting Investor — here an investor holding not less than 5% of the issued register — while every investor, whatever its holding, receives the annual audited accounts and the capitalisation statement. The split keeps the reporting calendar from having to serve everyone who ever wrote a cheque. Schedule 7 · Clause 15.2 · Chapter 11

Investor Director

The director an investor is entitled to appoint and remove by notice. Their duties are owed to the company like any other director's, which is the tension the role lives with — and it is a different thing from an observer, who attends and receives papers but does not vote and carries no directors' duties. Clause 13.2 · Article 18 · Chapter 11

Investor Majority

The defined group whose agreement counts as the investors' agreement — typically a majority by shareholding of the investor class. It decides who really holds the consent rights, and a single investor large enough to be the majority on its own holds them alone. Definition: Investor Majority · Chapter 11

Issued register

The shares actually in issue and entered in the register of members, and the votes they carry — never padded with an unissued option pool. This is the basis for anything legal or regulatory: who can pass a resolution, who controls the company, and every statutory or anti-money-laundering threshold. Clause 7.2 · Chapter 1

L

Leakage

A buyer's word, not a venture one, and it matters here only because two things this course builds were still running when the company was sold. Value that slips out of a company to its seller between the signing of a sale and completion — a dividend, a management charge, a bonus — is what a buyer's price assumes will not happen, so a sale agreement names it, forbids it, and lists the exceptions it will tolerate as permitted leakage. The monthly management charge and the retention bonuses both had to be named. Chapter 12 · Chapter 15

Leaver

Anyone holding shares or options who stops working for the company. The documents sort them into good and bad, and the sorting decides whether they keep what they have — which is why the definition is negotiated much harder than its dull name suggests. Definition: Leaver · Chapter 5

Liquidation event

The event that sets the waterfall running. It covers a winding-up, but the definition is always extended to catch a share sale, a sale of the business and sometimes a listing — a deemed liquidation event — because otherwise a preference would only ever pay out in a disaster. Solaris's article 5.3 deems exactly two: a share sale and a sale of the whole or substantially the whole business. A listing is not one of them — it is a Qualifying Exit, and under article 6.3 every preference share converts automatically immediately before it, so one price pays one class and there is no waterfall left to run. Constitution: Liquidation Event · Chapter 9

Liquidation preference

The right of a preference class to be paid out first, ahead of the ordinary shares, when money is distributed on an exit. It is a preference over other shareholders and nobody else — every creditor of the company still ranks ahead of it. Article 5 · Chapter 9

Longstop date

The date by which something must have happened or a fallback applies. A convertible instrument uses one so the money cannot sit off-register forever — Solaris's advance subscriptions converted at the cap on 11 March 2023 if no qualifying round had arrived — and a conditional agreement uses one so the parties can walk away. Clause 5.4 · Chapter 3

M

Management services agreement

A contract under which an investor charges the company a monitoring fee for the time its people spend on the board and the business. Solaris's ran from 2 May 2022 at €5,000 a month and was varied to €25,000 a month in June 2023 — a related-party fee approved under a consent regime by the investor receiving it, which is a conflict worth naming out loud. Clause 16 · Chapter 12

Maturity and redemption

A note's backstop: the date on which, if it has not converted, it becomes repayable, and the mechanism for repaying it. In venture both are largely theatre — a company that has to redeem its convertible notes in cash is usually a company that cannot — but they are what makes the instrument debt rather than equity while it lasts. Appendix 2 · Chapter 4

Most-favoured terms

A promise to an early investor that if anyone later gets a better deal on the same kind of instrument, the early investor gets it too. Sometimes called a most-favoured-nation clause. It is a sensible answer to investing before there is a price, and a nuisance to administer once there are several rounds of paper. Chapter 3

N

Negative control

The power to stop something rather than to make it happen. A holder of more than 25% of the votes can defeat any special resolution, so the constitution cannot be amended over its objection, and a holder of more than 25% in nominal value of a class can defeat a variation of that class's rights, which article 9.1 permits only with 75% of the class — in writing, or by special resolution at a separate class meeting. Meridian's 28.57% of the Solaris register bought exactly this — and so did the three provisions where its real power lived: the board seat, the quorum rule and the consent list each stop things, and none of them makes anything happen. Control that could make things happen arrived only with the Series B, when Meridian passed half the register at 52.31%. Article 9.1 · Chapter 11

Nominal value

The fixed face value written on a share — €0.01 for most of Solaris's life, €1.00 at the end. It is never the issue price, it is never what the share is worth, and its only real jobs are that a share cannot be issued for less than it and that it fixes what goes into share capital rather than premium. Chapter 1 · Chapter 2

Nominee

Someone holding shares in their own name for somebody else, the beneficial owner, usually under a declaration of trust. Convenient at the time and a liability later: the single share taken by a Solaris founder in the Polish subsidiary in February 2021 was still in his name when a diligence team found it five years on. Chapter 2

Non-participating and participating

The two flavours of liquidation preference. Non-participating means the class takes its preference amount and stops — or elects to convert and take its share of everything instead. Participating means it takes the preference amount and shares in what is left, which is a genuinely different and much more expensive animal. Article 5.2 · Chapter 9

O

Option

A right to acquire shares at a fixed price, granted rather than sold, usually to employees. Until exercise the holder owns nothing: no shares, no votes, no dividends and no seat at any table — which is why an option pool sits in the fully diluted count and never on the register. Appendix 4 · Chapter 12

Option pool

Shares set aside, unissued, so options can be granted out of them without a fresh negotiation each time. Solaris's employee capacity reached 260,000 — 100,000 reserved at the Series A, 100,000 more at the Series B, and 60,000 shares the Employee Trust already held and recycled — and every one of them was granted, to 105 people, in two tranches, at €4.00 and €2.00. Clause 7 · Chapter 12

Option sweep

Exercising every outstanding option in one step so the company can be sold with nothing hanging over its share capital. An Exit alone makes an option exercisable only to the extent it has vested, so sweeping all 260,000 of Solaris's on 30 September 2025 needed the board first to accelerate every unvested option — which clause 7.4 and rule 5 of the Plan let it do only with Investor Consent. The €760,000 of exercise monies was lent by Meridian and recovered by set-off against what it owed the option holders for their shares. Deed of Exchange, clause 2 · Chapter 15

Original Issue Price

The price at which a class of preference shares was first issued, fixed for good and used as the numerator in the conversion sum. Do not confuse it with the preference amount, which is the money actually advanced for the share, or with the conversion price, which moves. Constitution: Original Issue Price · Chapter 8

Own funds

The regulatory capital a regulated firm must hold, measured against a floor set by its fixed overheads. It is a real balance-sheet test and it is not the same thing as issued share capital — which is why capitalising a reserve to turn 15,650 shares into 100,000 changed the company's regulatory position not at all. Chapter 15

P

Pari passu

"On an equal footing" — two classes or instruments ranking alongside each other, sharing rateably if there is not enough to pay both in full. After Solaris's Series B the Series A and the Seed shares ranked pari passu with each other and both sat below the Series B. Chapter 9

Pay-to-play

A rule that an investor who does not put in its share of the next round loses its preference rights — its shares convert to ordinary, one for one, taking the anti-dilution adjustment and the class consents with them. One Solaris fund declined the Series B and watched 40,000 preference shares become 40,000 ordinary. Clause 18 · Chapter 13

Permitted transfer

A transfer the constitution lets through without pre-emption, tag or consent — typically to a spouse or family trust, or within a fund's own group. The carve-outs are sensible; the clawback matters just as much, because when the transferee stops standing in that relationship the shares have to come back. Article 12 · Chapter 14

Pool shuffle

Creating or enlarging the option pool out of the pre-money, so that the existing holders rather than the incoming investor pay for it. It is entirely standard and entirely worth arguing about: at Solaris's Series A the founders' block carried about 60% of the new pool's cost and the converting angels and noteholders the rest. Chapter 7

Power of attorney

Authority to sign a document on somebody else's behalf. Drag-along machinery always contains one, because a dragged shareholder who refuses to sign a transfer would otherwise be able to stop a deal the article says they cannot stop. Note where it lives: the one that binds a dragged holder sits in the constitution, at article 15.5, because it must bind a member who never signs the sale documents; clause 8 of the Deed of Exchange records it and grants a separate power against the parties who did sign. Chapter 14

Pre-emption on issue

An existing shareholder's right to be offered its proportion of any new shares before they go to anyone else, so it can protect its percentage by writing another cheque. Waivable, and usually waived, but the waiver is a document somebody has to actually obtain. Clause 17 · Article 10 · Chapter 11

Pre-emption on transfer

The right of first refusal that operates when an existing holder wants to sell: a transfer notice goes to the company, the shares are offered round the other shareholders at the notice price or at fair value, and only what nobody takes may go to the outsider. It is why a private company's register moves slowly. Article 13 · Chapter 14

Preference Amount

The sum a preference share is entitled to be paid first on a liquidation event. Read the definition before you assume it: in this course it is the amount actually subscribed or advanced for that share, so the preference pot is the money that really went in, not the share count multiplied by an issue price. Definition: Preference Amount · Chapter 9

Preference shares

Shares carrying rights the ordinary shares do not have — a liquidation preference, an anti-dilution adjustment, class consents, sometimes enhanced votes. In venture they are the investor's class, and each round tends to create a new one ranking above the last. Article 1 · Chapter 9

Pre-money and post-money valuation

The agreed value of the company before the new money goes in, and the same value with the new money added. Divide the pre-money by the pre-money fully diluted share count and you have the price per share, which is the number everything else in a round hangs off: Solaris's Series A was €6,000,000 pre-money, €8,000,000 post-money, at €10.00 a share. Schedule 2, Part B · Chapter 7

Q

Qualifying Financing

The round big enough to trigger automatic conversion of the convertible instruments — €2,000,000 of new money, in Solaris's case. The threshold protects both sides: the investor is not converted into a trivial round, and the company is not left arguing about whether a raise counted. Definition: Qualifying Financing · Chapter 8

Quorum

The minimum attendance a board or shareholder meeting needs before it can decide anything. An investor director who counts towards the quorum holds a quiet veto — no attendance, no meeting — which is why quorum provisions are negotiated alongside the consent matters rather than skimmed as boilerplate. Article 19 · Chapter 11

R

Ranking and seniority

The order in which classes get paid on an exit. Senior means paid first and in full before the next class sees anything; the classes below share what is left. Solaris ended with a €5,900,000 stack: Series B €3,000,000 senior, then Series A €2,400,000 and Seed €500,000 ranking equally beneath it. Article 5 · Chapter 9

Redesignation

Relabelling existing shares as a different class without issuing or cancelling anything — the register keeps the same numbers and the shares acquire different rights. Distinguish it from conversion, which turns one class into another under the conversion machinery, and from cancelling an empty class, which moves no share and no number but strips three classes of rights out of the constitution — real work, and the reason the closing register reads as one clean line. Deed of Exchange, resolution 1 — expressly not a redesignation · Chapter 15

Register of members

The book in which the company records who owns its shares, and the place where legal title actually lives — not the certificate, not the public filing, not the cap table spreadsheet. Everything in a venture deal is a plan for what this book will say. Cap table: the closing register · Chapter 2

Repetition of the warranties

Warranties given again at a later date, so they are tested against the facts as they stand then rather than only as they stood at signing. Solaris's investors had them repeated at the Series B — which meant a warranty that had been inaccurate when first given in 2022 was inaccurate a second time in 2023. Clause 10 · Chapter 10

Re-trades

An investor coming back after the term sheet to reopen a term that was supposed to be settled, usually citing something diligence turned up. Sometimes legitimate, sometimes a tactic, always easier to resist if the term sheet was specific in the first place. Chapter 6

Reverse vesting

Vesting applied to shares somebody already owns: they hold the whole block from day one, and whatever has not vested can be compulsorily transferred away if they leave early — at €0.01 a share here, to the employee trust, to the company or to a nominated person, depending on what the article says. It is how founder shares are handled, and it only works if the constitution carries the compulsory transfer article to back it. Clause 12 · Chapter 5

Roll and cash elections

The choice offered to minority shareholders in a share-for-share exchange: take shares in the new holding company, or take cash and go. Four of Solaris's holders took the roll election: 455,000 shares, valued like everyone else's at the €12.00 Exchange Price — €5,460,000 — satisfied not in cash but by 273,000 new shares in the buyer, issued at an agreed €20.00 each. The rest took the cash election at the same €12.00, and two who refused both were dragged on identical terms. Deed of Exchange, clause 4 · Chapter 15

Runway

How many months the company can keep going on the cash it has. It is not a legal concept and it governs everything: runway decides when a round has to start, how much leverage the founders have when it does, and whether a bridge is a strategy or a rescue. Chapter 11

S

Set-off

Two people who owe each other money settling the difference instead of sending two payments. It is how an option sweep is funded without anyone finding real cash: the buyer lends the exercise monies, the option holders buy their shares, and the loan is netted off what the buyer owes them for those same shares. Deed of Exchange, clause 2.2 · Chapter 12

Shadow class

A class that exists on paper with rights nobody is exercising — typically because its holders lost the substance of them through pay-to-play or because the class has been emptied by conversion. Harmless until somebody tries to sell the company, at which point empty classes with live rights have to be cleared out of the constitution. Chapter 13

Share premium

Everything paid for a share above its nominal value, held in the share premium account — a reserve that is not distributable and can only be used for a few specific things, one of which is paying up bonus shares. Solaris raised €6,823,000 of subscription money on €15,000 of nominal capital, so almost all of it was premium. Chapter 1 · Chapter 13

Share recycling

Re-using shares that have come back to the company or its employee trust — from a leaver, from lapsed options — to satisfy new grants, instead of reserving fresh ones. It is free capacity: 60,000 of Solaris's 260,000 options were satisfied out of recycled shares and diluted nobody twice. Chapter 12

Simple agreement for future equity

The standard US instrument for investing before there is a price — the American cousin of the advance subscription agreement, and the reason people say "SAFE" in conversations about English deals. The economics rhyme; the drafting, the tax treatment and the company-law plumbing do not, so the two are compared and never conflated. Chapter 3

Stack

The accumulated liquidation preferences of every class, taken together, that must be paid before the ordinary shares receive anything. Solaris's reached €5,900,000, which is the number to hold beside any proposed sale price when you want to know whether the founders and the team get paid at all. Chapter 9

Subject to contract

The label that keeps negotiations from accidentally becoming a binding agreement. Put it on the term sheet, keep it on the correspondence, and be clear which paragraphs are deliberately carved out of it — exclusivity, costs, confidentiality. Chapter 6

T

Tag-along

A minority holder's right to join a sale by a majority holder, on the same price and the same terms, so the majority cannot sell control and leave everyone else behind with a new and unknown partner. The mirror image of a drag-along, and the one shareholders actually thank you for. Article 14.2 · Chapter 14

Term sheet

The short document setting out a round's shape — price, amount, class rights, board, consent matters — before anyone drafts the long form. Mostly non-binding, but binding where it says so, and enormously influential either way: what is conceded here is very hard to win back. Recital (E) · Chapter 6

Transfer Notice

The notice a shareholder must serve when it wants to sell, which starts the pre-emption machinery running and states the price it wants. Serving one is often deemed to have happened automatically — a leaver, or a shareholder that ceases to be controlled by the person who controlled it. Article 13 · Chapter 14

U

Uplift

An anti-embarrassment right: extra money for the people who took cash or were dragged, payable if the buyer resells within a stated window at more than a stated value. Solaris's was stepped rather than formulaic — €5.00 per uplift share above one threshold and a further €5.00 above another, on 380,000 shares — precisely so nobody would end up arguing about a valuation. Deed of Exchange, clause 5 · Chapter 14 · Chapter 15

V

Valuation cap

The maximum company valuation at which a convertible investor's money will convert, however expensive the eventual round is. It is the early investor's reward for backing a company before anyone had put a number on it: Solaris's angels capped at €2,000,000 pre-money and the noteholders at €4,800,000. Definition: Cap · Chapter 3

Venture capital

Equity investment in young private companies, made in stages, by funds that expect most of their investments to fail and one to pay for everything. Almost every term in this glossary exists because of that shape: money in instalments, protection on the downside, and a relentless focus on the exit. Chapter 1

Vesting

Earning shares or options over time, so that leaving early means leaving some of them behind — classically four years with a one-year cliff. It aligns everybody's interests and it is the single provision most likely to have been promised in one document and never implemented in another. Schedule 6 · Chapter 5

Vesting commencement date

The date the vesting clock starts, which is often not the date of the document that imposes it. Solaris's founder vesting was imposed with the advance subscription agreements of 11 March 2021 but ran from 1 April 2021, and that three-week gap is what put the twelve-month cliff one day after the settlement deed. Definition: Vesting Commencement Date · Chapter 5

Virtual asset service provider

The pre-MiCA Irish registration regime for crypto-asset businesses, which commenced in April 2021 and under which Solaris was registered from April 2022. It shaped this company's whole funding history: it is why the first raise avoided debt, and why both priced rounds completed only after the regulator had looked at the incoming investor. Chapter 3 · Chapter 10

W

Warrantors

The people actually on the hook for the warranties. On a venture round it is the company and the founders personally — company warranties about the business, founder warranties overlapping and capped separately — which is a very different allocation from a sale, where a holding company warrants and the people who know the business warrant nothing. Definition: Warrantors · Chapter 10

Warranty

A contractual statement that something is true, giving a claim in damages if it is not. Investors take them, cap them and then very rarely sue on them — the real value is that drafting the schedule forces the founders to go and check, and the disclosure exercise surfaces what they find. Schedule 4 · Chapter 10

Waterfall

Working the exit proceeds down the ranking, class by class, until the money runs out — senior preference first, then the classes beneath it, then the ordinary shares. Run it at three different prices and you learn more about a set of documents than any amount of reading them. Article 5 · Chapter 9