Ratchets Definition

GLOSSARY

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What does Ratchets mean?

A structure that determines the eventual equity allocation between groups of shareholders. A ratchet enables a management team to increase its share of equity in a company if the company is performing well. The equity allocation in a company varies, depending on the performance of the company and the rate of return that the private equity firm achieves.

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Best Practice Guide for Term Sheet Completeness—Explainer

Best Practice Guide for Term Sheet Completeness—Explainer The Loan Market Association and European Leveraged Finance Association published a guide in November 2020 (updated in 2021) entitled Best Practice Guide for Term Sheet Completeness, for use on leveraged finance transactions. The aim of the Best Practice Guide is to assist investors in the investment decision by ensuring that leveraged finance term sheets contain as much detail as possible as to key terms. To this end, the Best Practice Guide sets out a list of those provisions identified by investors as being of material importance to their investment decision. The Best Practice Guide presupposes a high level of understanding of leveraged finance terms and jargon. The Best Practice Guide lists the terms that should be included, and under each term sets out a bullet point list of the various points that the term sheet should cover in relation to that particular term. This Practice Note lists out the terms referred to in the Best Practice Guide and, under the heading Provision,...

Venture capital investment

Venture capital investment Venture capital is a type of private equity investment provided to early stage, start-up businesses with little or no operating history. Background to venture capital investment Why seek investment? Businesses that seek venture capital investment are generally too small to raise capital in the public markets and are unable to secure debt finance. The combination of a lack of operating history and, in many cases, an unproven business model underpinned by untested technology, makes investing in such businesses a high-risk strategy. Investors interested in these types of businesses will usually bring technical, as well as managerial, expertise to the management team. However, they will look to make high rates of return on their investments because of their high-risk nature. Types of investment and investors There are different phases of venture capital investment, depending largely upon the stage of the investee company’s development and the level of investment required. First round investment in very early-stage businesses, or seed capital investment, is usually confined to family and...

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Tax weekly highlights—1 February 2024

This week's edition of Tax weekly highlights includes: (1) government tabled amendments to Finance Bill 2024 provisions on R&D tax relief, the creative sector tax reliefs and the electricity generator levy, and (2) HMRC’s publication of new transfer pricing operational guidance covering HMRC’s application of the ‘6-step process for analysing risk’ within Chapter 1 of the OECD Transfer Pricing Guidelines.

IFS and abrdn produce joint report on new approach to improve state pension scheme

The Institute for Fiscal Studies (IFS) in partnership with the abrdn Financial Fairness Trust have published, as part of the Pensions Review, a new report suggesting a new way forward for the state pension system, to improve financial security in retirement and ensure the state pension is sustainable. The Pensions Review found that the current state pension has many strengths, but research indicates several problems. Many younger people believe that state pensions will not exist in the future, there is uncertainty around increasing state pension and there is no certainty regarding the level of the state pension. In response, a ‘four-point pension guarantee’ has been devised.

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