Corporate records and equity, defined.
A working glossary of the terms that show up in minute books, share certificates, registers, cap tables, and shareholder agreements. Each entry includes the US, Canada, and UK equivalents, because the same artifact is often called three different things.
83(b) election
US tax election under IRC § 83(b)A US tax election to be taxed at grant rather than at vesting on restricted stock. Must be filed within 30 days of grant, critical for founders.
Read definition Compliance & taxAccumulated Adjustment Account (AAA)
S corp distribution tracking, IRC § 1368(e)(1)S corp notional tax account tracking pass-through earnings available for tax-free distribution to shareholders. Critical for S corps with prior C corp E&P.
Read definition International & cross-borderAktiengesellschaft (AG)
German public-company form, AktGGermany's public stock corporation. Minimum €50,000 capital, mandatory two-tier board (Vorstand + Aufsichtsrat). The German equivalent of a US C-corp or UK PLC.
Read definition ComplianceAnnual general meeting (AGM)
Required yearly meeting of shareholdersThe required yearly meeting of shareholders. Directors are elected, financial statements are tabled, and ordinary business is conducted. Often waivable by unanimous written consent.
Read definition ComplianceAnnual return
Yearly filing with the corporate registryThe yearly filing with the corporate registry confirming that the corporation still exists. Updates registered office, directors, and share structure. Distinct from a tax return.
Read definition Cap table & equityAnti-dilution protection
Down-round protection for preferred holdersAdjusts the conversion ratio of preferred shares when the corporation issues new shares at a lower price. Two main types: full ratchet (aggressive) and weighted average (common).
Read definition M&A & exitAmalgamation
Statutory merger under CBCA s. 181-185Canadian statutory mechanism by which two or more corporations combine into a single surviving corporation. Short-form (parent + subsidiary) and long-form variants.
Read definition Corporate recordsArticles of incorporation
Delaware: certificate of incorporation. UK: articles of associationThe foundational document filed with the corporate registry to create a corporation. Defines name, share structure, registered office, and incorporators.
Read definition ComplianceBeneficial owner (UBO)
Person with significant control. US: BOI. CA: ISC. UK: PSCThe natural person who ultimately owns or controls a corporation. Reporting required under the US Corporate Transparency Act, the CBCA ISC register, and the UK PSC register.
Read definition Compliance & taxCapital Dividend Account (CDA)
Notional tax account, Section 89(1) ITATracks the tax-free portion of capital gains, life insurance proceeds, and capital dividends received. Distributable as tax-free dividends via Form T2054 election.
Read definition Corporate recordsBoard resolution
Also: director resolution, board consentThe formal written record of a decision by the directors of a corporation. May be passed at a meeting or by written consent. Authorizes share issuances, officer appointments, and more.
Read definition International & cross-borderBV (Besloten Vennootschap)
Dutch private limitedNetherlands' private limited company under Dutch Civil Code Book 2. Flex-BV reforms (2012) reduced minimum capital to €0.01. Very common international holdco vehicle.
Read definition Corporate recordsBylaws
UK functional equivalent: articles of associationThe internal procedural rules of a corporation. Govern officers, meetings, signing authority, voting rules, and indemnification. Not typically filed publicly.
Read definition Compliance & taxButterfly transaction
Section 55(3)(b) divisive reorganizationTax-deferred reorganization that splits corporate assets among shareholders. Used when partners separate, families divide assets, or business lines spin off.
Read definition Compliance & taxC corp vs S corp vs LLC
Fundamental US entity-classification choiceFederal tax treatment, owner restrictions, and capital-raising flexibility differ significantly across the three. The most consequential decision at incorporation.
Read definition Cap table & equityCap table
Capitalization tableA live summary of who owns what, fully diluted. Built from the share register, then extended to include options, warrants, and SAFEs.
Read definition Cap table & equityCo-sale right
Investor's tag-along on founder secondary salesLets investors sell proportionally when a founder sells shares to a third party. Common in venture-backed companies to prevent founders from cashing out while investors are locked in.
Read definition Cap table & equityCommon stock / common shares
UK: ordinary sharesThe standard voting equity of a corporation. Junior to preferred in dividends and liquidation. Represents the residual claim on corporate assets.
Read definition Cap table & equityConvertible note
Convertible debt with interest and maturityShort-term debt that converts to equity at the next priced equity round. Carries interest and a maturity date, plus a valuation cap and discount.
Read definition M&A & exitContinuance
Move jurisdiction of incorporationMove a corporation's jurisdiction of incorporation from one to another (e.g., Ontario to CBCA, or CBCA to Delaware). CBCA s. 187 (export) and s. 188 (import).
Read definition Corporate recordsCorporate records book
US term. Canada/UK: minute bookThe structured record of a corporation's formation, ownership, leadership, and significant decisions. The documentary backbone of corporate authority.
Read definition Cap table & equityDiscount rate (SAFE/note)
Percentage off priced-round price at conversionThe percentage discount on the priced-round share price that a SAFE or convertible note holder receives at conversion. Typical range: 10% to 25%.
Read definition ComplianceDissolution / winding-up
UK: strike-off, liquidationThe formal termination of a corporation's legal existence. May be voluntary or involuntary. Triggers a wind-up: liquidating assets, paying creditors, distributing residual assets.
Read definition Cap table & equityDrag-along right
Forced-sale right for the majorityAllows a majority or specified group to compel minority shareholders to participate in a sale of the corporation. Prevents holdouts in M&A transactions.
Read definition M&A & exitEarn-out
Contingent post-close purchase priceContingent portion of M&A purchase price paid post-close based on achievement of revenue, EBITDA, or milestone targets. Bridges valuation gaps; common in tech and services deals.
Read definition Compliance & taxEstate freeze
Section 85 / 86 corporate freezeTax planning technique that locks in current corporate value with the founder and shifts future appreciation to the next generation. Often via Section 86 reorganization.
Read definition Compliance & taxF reorganization
Tax-deferred restructuring, IRC § 368(a)(1)(F)Mere change in identity, form, or place of organization. Heavily used in private equity to convert S corps to LLCs immediately before sale.
Read definition M&A & exitEscrow holdback
Indemnity escrow for post-close claimsPortion of purchase price (typically 10-15%) held in escrow at closing to secure seller's indemnification obligations. Released to seller after the survival period or used to satisfy buyer claims.
Read definition International & cross-borderGmbH
Gesellschaft mit beschränkter HaftungGermany's private limited liability company under the GmbHG. Minimum €25,000 capital. The default vehicle for closely-held German businesses and most German startups.
Read definition International & cross-borderHandelsregister
German commercial registerGermany's public commercial register, maintained at the Local Court. Where GmbHs and AGs are registered. Conceptually equivalent registries exist across the EU and internationally.
Read definition Compliance & taxHoldco-opco structure
Two-tier Canadian corporate structureA holding company (Holdco) owns shares of an operating company (Opco). Tax-deferred dividend flow under Section 112; asset protection; estate planning.
Read definition M&A & exitIndemnification
Seller covenant for post-close lossesSeller's contractual promise to compensate buyer for losses from breaches of reps, warranties, or covenants. Subject to caps (typically 10-20% of purchase price), baskets, and survival periods.
Read definition Cap table & equityIssued vs. authorized shares
Authorized, issued, outstanding, treasuryAuthorized: the maximum permitted by the articles. Issued: actually sold or granted. Outstanding: issued minus treasury. Treasury: repurchased by the corporation.
Read definition M&A & exitLetter of intent (LOI)
Preliminary M&A deal termsPreliminary, mostly non-binding document outlining major M&A deal terms. Specific provisions (exclusivity, confidentiality, expenses) are typically binding.
Read definition Compliance & taxLifetime Capital Gains Exemption (LCGE)
Section 110.6 ITA — QSBC exemptionCanadian tax exemption on capital gains from QSBC share dispositions. Indexed annually; ~$1.016M per individual for 2026.
Read definition Cap table & equityInformation rights
Investor's right to financial reporting and updatesContractual right of major investors to receive ongoing financials, budgets, cap table updates, and material event notices. Granted to investors above a threshold.
Read definition Compliance & taxIntercorporate dividends
Section 112(1) ITA — tax-free corporate dividendsDividends paid between Canadian corporations, generally deductible from the recipient's income. The foundation of the holdco-opco structure.
Read definition Cap table & equityLiquidation preference
1x non-participating is standardPreferred shareholders' right to receive a specified amount before common in a liquidation event. Standard: 1x non-participating.
Read definition Cap table & equityMFN clause
Most Favored Nation: better terms automatically pass throughEntitles investor to receive any more favorable terms the company subsequently offers to another investor in the same instrument class. Common in SAFEs.
Read definition M&A & exitPlan of arrangement
Court-approved statutory restructuring (CBCA s. 192)Court-approved Canadian restructuring mechanism. Used for take-privates, three-cornered amalgamations, debt restructurings. 2/3 shareholder approval plus court fairness hearing.
Read definition Corporate recordsMinute book
Canada/UK term. US: corporate records bookThe bound or digital record of a corporation's articles, bylaws, registers, resolutions, and share certificates, organized in chronological order.
Read definition Cap table & equityPar value
Also: nominal value. Largely vestigial todayA nominal value assigned to each share, historically the minimum issuance price. Most modern jurisdictions permit no-par-value shares and treat par as vestigial.
Read definition Share classes & instrumentsOption pool (ESOP)
Reserved shares for employee equity grantsA block of shares reserved for grants to employees, directors, advisors. Sized at 10-20% of fully diluted equity. Pre-money top-up at Series A dilutes founders, not new investors.
Read definition Cap table & equityPreferred stock / preferred shares
Series A, B, C designations. UK: preference sharesA senior class of equity with priority over common in dividends and liquidation. Typically issued to institutional investors in priced rounds.
Read definition Cap table & equityPro-rata rights
Right to participate in future rounds to maintain ownershipInvestor's contractual right to participate in subsequent financings up to their pro-rata share, preventing dilution. Common right granted to major investors.
Read definition International & cross-borderPte Ltd (Singapore)
Singapore private limitedSingapore's private limited company under the Companies Act 1967. Common international holdco vehicle, especially for Asia-Pacific operations.
Read definition ComplianceQSBS (Section 1202)
Qualified Small Business Stock, US federal taxUS federal tax exclusion on gain from qualified small business stock held 5+ years. Up to $10M or 10x basis per holder per corporation. Requires a C-corp.
Read definition Compliance & taxReasonable compensation (S corp)
Owner-employee W-2 wages requirementIRS requirement that S corp shareholder-employees take "reasonable" W-2 wages before profit distributions. A major audit-focus area.
Read definition Governance & rightsRegistration rights
Right to require registration of shares for public saleDemand rights (force the company to register) and piggyback rights (include shares in any company-led registration). Mostly relevant for US IPO-bound companies.
Read definition M&A & exitR&W insurance
Insurance covering breaches of reps and warrantiesInsurance policy covering losses from breaches of seller's reps and warranties in M&A. Allows for 'no recourse' or 'minimal recourse' deal structures. Standard in mid-market and larger deals since 2018.
Read definition Compliance & taxS corporation election
Form 2553 pass-through election, IRC § 1362(a)Federal election that converts a US corporation to pass-through tax treatment. Restricted to 100 US-person shareholders with a single class of stock.
Read definition Compliance & taxSafe income / GRIP
Section 55(2) safe-income; Section 89(1) GRIPNotional Canadian tax pools tracking earnings available for tax-efficient dividend distribution. Safe income protects intercorporate dividends; GRIP determines eligible dividend designation.
Read definition Corporate recordsRegistered agent
US term. Canada: agent for serviceThe person or company authorized to receive service of process on behalf of a corporation. Required in most US states.
Read definition Corporate recordsRegistered office
Statutory address; must be in the jurisdiction of incorporationThe statutory address of a corporation, used to receive legal documents and government correspondence. Public on the registry.
Read definition Governance & rightsRight of first offer (ROFO)
Offer to existing holders before going to marketRequires seller to offer to existing holders first. Only if they decline can the seller approach third parties, on terms at least as favorable as what was offered. Different from ROFR.
Read definition Cap table & equityRight of first refusal (ROFR)
Right to match a third-party offerThe contractual right to match a third-party offer for shares before the shareholder can complete the sale. Used to control who joins the cap table.
Read definition Cap table & equitySAFE (post-money)
Simple Agreement for Future EquityA convertible instrument that buys a fixed percentage of the post-money cap. Converts at the lower of the valuation cap or the discount rate.
Read definition Compliance & taxSection 51 share exchange
Convertible securities rollover, Section 51(1) ITATax-deferred exchange when a convertible security (note, debenture, convertible preferred) converts to common shares of the same corporation. Automatic, no election form.
Read definition International & cross-borderSAS (France)
Société par Actions SimplifiéeFrance's modern simplified joint-stock company. Flexible governance under the Code de commerce. The default modern French startup vehicle.
Read definition Compliance & taxSection 1244 stock
Ordinary loss treatment, IRC § 1244Tax treatment converting capital losses on certain small-business stock into ordinary losses (up to $50K single / $100K MFJ per year).
Read definition Compliance & taxSection 1374 BIG tax
Built-In Gains tax on C-to-S conversionFederal tax on net recognized built-in gain when a C corporation converts to S corp status. Applies during the 5-year recognition period.
Read definition Compliance & taxSection 199A QBI deduction
20% pass-through deduction (TCJA 2017)20% federal income tax deduction for qualified business income from pass-through entities. Subject to W-2 wages limit and SSTB phaseouts. Sunsets after 2025.
Read definition Compliance & taxSection 338(h)(10) election
Stock purchase treated as asset purchaseJoint buyer/seller election that treats a stock purchase as a deemed asset purchase for US tax purposes. Common in private equity M&A.
Read definition Compliance & taxSection 351 contribution
Tax-deferred property-for-stock, IRC § 351Tax-deferred contribution of property to a controlled corporation in exchange for stock. The US workhorse for tax-deferred incorporation. US analog to Canada's Section 85 rollover.
Read definition ComplianceSection 85 rollover (Canada)
Canadian tax-deferred transfer of property to a corporationCanadian tax-deferred transfer of property to a corporation in exchange for shares. Used in incorporations, reorganizations, and estate freezes.
Read definition Compliance & taxSection 86 reorganization
Same-corporation share exchange, Section 86(1) ITATax-deferred exchange of shares within the same corporation. Most commonly used in estate freezes. No T2057 election required.
Read definition M&A & exitShare purchase agreement (SPA)
Definitive M&A contract for share dealsDefinitive contract governing the sale of a corporation's shares. Specifies purchase price, reps and warranties, covenants, conditions to closing, and indemnification framework.
Read definition Share certificatesShare certificate
Canada/UK term. US: stock certificateA formal document evidencing ownership of a specific number of shares of a specific class, identified by a unique certificate number.
Read definition Registers & ledgersShare register
Canada/UK term. US: stock ledger. UK: register of membersThe statutory list of all shareholders, the shares they hold, the certificates issued, and the date each entry took effect. The source of truth for ownership.
Read definition Corporate recordsShare transfer
The sale, gift, or other transfer of shares between holdersThe transfer of shares from one holder to another. Requires a transfer agreement, certificate cancellation and reissuance, and a share register update.
Read definition Governance & rightsShareholders agreement
Contract governing shareholder relationship and rightsContract among shareholders covering voting, transfer restrictions, drag/tag, board composition, ROFR, exit mechanics. CBCA 'unanimous shareholders agreement' can restrict directors' powers.
Read definition Corporate recordsShareholder consent in lieu of meeting
Written resolution standing in place of a meetingA written resolution signed by shareholders standing in place of a meeting. Thresholds differ: majority in Delaware, unanimous under CBCA.
Read definition Cap table & equitySide letter
Supplementary agreement granting special investor termsSide agreement granting specific rights or accommodations to one investor outside the main financing documents. Common for tax-exempt entities, lead investors, and MFN-protected investments.
Read definition International & cross-borderSocietas Europaea (SE)
European Company, EU Reg. 2157/2001Pan-European corporate form. Lets a company operate as a single legal entity across multiple EU member states and move registered office between them.
Read definition Share certificatesStock certificate
US term. Canada/UK: share certificateA document, paper or digital, evidencing ownership of shares in a US corporation. Recognized under DGCL § 158 and equivalent state statutes.
Read definition Registers & ledgersStock ledger
US term. Canada/UK: share registerThe statutory list of stockholders required by DGCL § 219. Determines voting rights, dividend entitlements, and standing to inspect books.
Read definition Cap table & equityStock options
Employee stock options. US: ISO, NSOContractual rights to buy shares at a fixed strike price, typically granted to employees and advisors under an equity incentive plan. Vest over time.
Read definition Compliance & taxT2057 (Section 85 election form)
Joint Section 85 rollover formJoint election form filed by transferor and transferee corporation to elect Section 85 rollover treatment. Specifies the elected amount; filing deadline tied to either party's tax return.
Read definition Cap table & equityTag-along right
Co-sale right for minority shareholdersAllows minority shareholders to participate proportionally if a majority shareholder sells. The mirror image of a drag-along right.
Read definition Cap table & equityTerm sheet
Non-binding outline of investment termsDocument summarizing valuation, security, board, investor rights, and protective provisions before definitive financing documents. Mostly non-binding except exclusivity and confidentiality.
Read definition Cap table & equityTreasury shares
Issued but not outstanding. Held by the corporationShares the corporation has repurchased and now holds itself. Issued but not outstanding, do not vote, do not receive dividends. CBCA corporations cancel them automatically.
Read definition International & cross-borderUBO register
EU AMLD beneficial-owner registerEU-wide register of ultimate beneficial owners under the 4th, 5th, and 6th Anti-Money Laundering Directives. Filed in each member state (Transparenzregister in Germany, KvK in the Netherlands, RBE in France).
Read definition Cap table & equityValuation cap
Maximum valuation at SAFE/note conversionThe maximum valuation at which a SAFE or convertible note will convert at the next priced round. Protects the early investor from valuation upside.
Read definition Cap table & equityVesting & cliff
Standard: 4-year vest, 1-year cliffVesting is the gradual earning of equity over time. A cliff is the minimum service before any vesting begins. Standard: 4-year vesting with a 1-year cliff.
Read definition M&A & exitWorking capital adjustment
Closing-date NWC adjustment to purchase priceAdjustment to M&A purchase price based on actual net working capital at closing vs. an agreed target. Calculated on the closing balance sheet, finalized 60-90 days post-close.
Read definition Cap table & equityWarrant
Right to buy shares, typically for investors or lendersA contractual right to buy shares at a fixed strike price within a defined window. Typically granted to investors, lenders, or strategic partners.
Read definitionOctelligence gives every corporation a structured set of digital corporate records, QR-verified share certificates, and a cap table built from the live share register.