Glossary
- 3rd F
- Advisor
- BA
- Balance Sheet
- BAN
- Barrier to Entry
- BP
- Business Angel
- Business Angel Network
- Business Plan
- Business Thumbnail
- Carbon Reduction Commitment
- Cash Flow Forecast
- Coach
- Conditions Precedent
- Copyright
- Corporate Social Responsibility
- CRC
- CSR
- Data Protection Act
- DD
- Director
- Disclosure Letter
- DPA
- Due Diligence
- Early-stage
- EIS
- Enterprise Investment Scheme
- Entrepreneur
- Equity
- Executive Summary
- Exit Multiple
- Expansion
- Family, Friends and Fools
- FFF
- Founder
- Gross Value Add
- GVA
- High Net Worth
- HM Revenue and Customs
- HMRC
- HNW
- IM
- Incubator
- Information Memorandum
- Intellectual Property
- Internal Rate of Return
- Investor
- Investor Ready
- IP
- IR
- IRR
- Loan
- Long Term Incentive Plan
- LTIP
- Management Buy In
- Management Buy Out
- MBI
- MBO
- Memorandum of Association
- Memorandum of Understanding
- Mentor
- MoA
- Money laundering
- MoU
- National Minimum Wage
- NED
- Neo Linguistic Programming
- NLP
- NMW
- Nomad
- Nominated Adviser
- Non-Executive Director
- Offer Letter
- Patent
- Payment in Lieu of Notice
- PILON
- Positive Ratchet Clause
- Pre-start
- Preference Shares
- Principles
- Profit and Loss
- Risk Premium
- Sales of Goods Act
- Shadow Director
- Shareholder Agreement
- Shares
- Small or Medium Enterprise
- SME
- SME
- SoGA
- Sophisticated Investor
- Start-up
- Sweat Equity
- Total Shareholder Return
- Trade secret
- Trademark
- TSR
- Unique Perceived Benefit
- Unique Selling Proposition
- UPB
- USP
- Warranty
- White Meeting
Ratchet
Investment agreements may have a ratchet clause included, which is designed to protect the rights of the investor when the company is not performing as expected.
For example, when an investment was made in a company, a ratchet clause was included in the agreement that stated that if the company did not generate enough profit over a given period, the investor's shares have twice the voting rights. If the investor had 40% of the voting equity and this clause was activated, the investor would increase his voting rights to 57% (40 * 2 / (100 + 40) ) giving them effective control of the company.
Ratchet clauses were common in the early 2000's but have become less popular since they are difficult to agree on during negotiations.
See also: Positive Ratchet Clause.
