Ratchets reduce the price at which venture capitalists can convert their debt into preferred stock, which effectively increases their percentage of equity. Often referred to as an "anti-dilution adjustment".

Source: ILPA

Capital provided for a significant overhaul of a company's financial structure.

Source: ILPA

Real estate includes wholly owned or partially owned:
• Investments in land, including products grown from the land (e.g., timber or crops).
• Buildings under development, completed buildings, and other structures or improvements.
• Equity-oriented debt (e.g., participating mortgage loans).
• Private interest in a property for which some portion of the return to the investor at the time of investment relates to the performance of the underlying real estate.

Source: GIPS

Realisation is the sale, redemption, or repayment of an Investment, in whole or in part; or the insolvency of an Investee Company, where no significant return to the Fund is envisaged.

Source: IPEV

An underlying investment of a fund that has been exited.

Source: ILPA

Cash and/or securities received by a partner.

Source: ILPA

The total amount of distributions that may be recalled by the fund at a future date.

Source: ILPA

The reorganization of a company's capital structure. A company may seek to save on taxes by replacing preferred stock with bonds in order to gain interest deductibility. Recapitalization can be an alternative exit strategy for venture capitalists and leveraged buyout sponsors.

Source: ILPA

A suggested provision, task, or action that should be followed or performed. A recommendation is considered to be best practice but is not a requirement. (See “should.”)

Source: GIPS

The act a broker/dealer makes with an investor to confirm a transaction.

Source: ILPA

The common name for a preliminary prospectus, due to the red SEC required legend on the cover.

Source: ILPA

Redeemable preferred stock, also known as exploding preferred, at the holder's option after (typically) five years, which in turn gives the holders (potentially converting to creditors) leverage to induce the company to arrange a liquidity event. The threat of creditor status can move the founders off the dime if a liquidity event is not occurring with sufficient rapidity.

Source: ILPA

The right or obligation of a company to repurchase its own shares. Redemption Rights - Rights to force the company to purchase shares (a "put") and more infrequently the company's right to force investor to sell their shares (a "call"). A Put allows one to liquidate an investment in the event an IPO or public merger becomes unlikely. One may also negotiate a Put effective when the company defaults or fails to make payments upon a key employee's death, etc.

Source: ILPA

The SEC's review process of all securities intended to be sold to the public. The SEC requires that a registration statement be filed in conjunction with any public securities offering. This document includes operational and financial information about the company, the management and the purpose of the offering. The registration statement and the prospectus are often referred to interchangeably. Technically, the SEC does not "approve" the disclosures in prospectuses.

Source: ILPA

Provisions in the investment agreement that allow investors to sell stock via the public market. Means by which one can transfer shares in compliance with the securities laws subject to Lock-Up and Market Stand-off Agreements.
Long-form Demand - Demand registration before the company becomes public. Usually starts one-three years after making an investment and may involve one or two demands for a percentage of stock. Company will use the SEC's long-form S-1.
Short-form Demand - Demand made after the company is publicly traded and is eligible to use SEC's Form S-3.
Piggyback - Company is registering stock either for itself or other stockholders and one can "piggyback" a portion of shares for registration onto the company's registration. Usually have these rights for up to five years after the company becomes public, but cannot exercise them for mergers or employee offerings.

Source: ILPA

SEC provision for simplified registration for small issues of securities. A Reg. A issue may require a shorter prospectus and carries lesser liability for directors and officers for misleading statements. The conditional small issues securities exemption of the Securities Act of 1933 is allowed if the offering is a maximum of $5,000,000 U.S. Dollars.

Source: ILPA

The regulation outlines registration requirements for Securities Act of 1933.

Source: ILPA

Regulation D, is the rule (Reg. D is a "regulation" comprising a series of "rules") that allow for the issuance and sale of securities to purchasers if they qualify as accredited investors.

Source: ILPA

The rules relating to offers and sales made outside the U.S. without SEC Registration.

Source: ILPA

Reg. S-B of the Securities Act of 1933 governs the Integrated Disclosure System for Small Business Issuers.

Source: ILPA

The Standard Instructions for Filing Forms Under Securities Act of 1933, Securities Exchange Act of 1934 and Energy Policy and Conservation Act of 1975.

Source: ILPA

The regulation that governs the requirements for financial statements under the Securities Act of 1933, and the Securities Exchange Act of 1934.

Source: ILPA

Reorganizations are significant changes in the equity base of a company such as converting all outstanding shares to Common Stock, or combining outstanding shares into a smaller number of shares (a reverse split). A reorganization is frequently done when a company has already had a few rounds of venture financing but has not been able to successfully increase the value of the company and therefore is doing a Down Round that is essentially a restart of the company.

Source: ILPA

If the private equity firm provided loans or bought preference shares in the company at the time of investment, then their repayment according to the amortisation schedule represents a decrease of the financial claim of the firm into the company, and hence a divestment.

Source: Invest Europe

Minority stake purchase from another private equity investment organisation or from another shareholder or shareholders.

Source: Invest Europe

The current fair stated value for each of the investments, as reported by the General Partner of the fund.

Source: ILPA

Representations and warranties by the vendor placed in the sale agreement when a company changes hands. They most usually cover things such as contingent liabilities, the company's tax position and the accuracy of the most recent audited accounts.

Source: ILPA

A provision, task, or action that must be followed or performed.

Source: GIPS

Financing made available to an existing business, which has experienced financial distress, with a view to re-establishing prosperity.

Source: Invest Europe

The remaining equity that limited partners or investors have in an investment vehicle at the end of the performance reporting period.

Source: GIPS

ILPA: The ratio of the current value of all remaining investments within a fund to the total contributions of Limited Partners to date. As defined in the current GIPS Standards (www.gipsstandards.org/standards/current/Pages/index.aspx), any reinvested capital (resulting from recallable distributions) should be included in the denominator of this ratio.

GIPS : Residual value divided by since-inception paid-in capital.

Source: ILPA, GIPS

‘Responsible investment’ involves an investment approach that integrates ESG factors into corporate conduct, investment decisions and ownership activities. A responsible investor will commonly be interested in the ESG conduct, impact or performance of a portfolio company it invests in, and in case of an LP, this may also include ESG aspects related to the GP.

Source: Invest Europe

Public securities that are not freely tradable due to SEC regulations.

Source: ILPA

Shares acquired in a private placement are considered restricted shares and may not be sold in a public offering absent registration, or after an appropriate holding period has expired. Non-affiliates must wait one year after purchasing the shares, after which time they may sell less than 1% of their outstanding shares each quarter. For affiliates, there is a two-year holding period.

Source: ILPA

Capital provided to an established firm, usually in a traditional sector, that is undergoing financial distress or a major re-organization, but is perceived as having long-term commercial viability.

Source: ILPA

A category of professionally managed private equity fund that relies on tax-assisted retail fund-raising, composed essentially of Labour-Sponsored Venture Capital Corporations and Provincial Venture Capital Corporations.

Source: ILPA

See: Internal Rate of Return.

Source: ILPA

The act of offering new, publicly-traded shares in a firm that was previously taken private through a buyout transaction.

Source: ILPA

The legal principle that actions, such as anti-takeover measures, that promote the value of an auction process are allowable, whereas those that thwart the value of an auction process are not allowed. The duty is triggered when a company is in play as a target acquisition.

Source: ILPA

The right of first refusal gives the holder the right to meet any other offer before the proposed contract is accepted.

Source: ILPA

Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed-end funds, which cannot otherwise issue additional ordinary shares.

Source: ILPA

The chance of loss on an investment due to many factors including inflation, interest rates, default, politics, foreign exchange, call provisions, etc. In Private Equity, risks are outlined in the Risk Factors section of the Placement Memorandum.

Source: ILPA

A private company strategy for gaining access to public markets through takeover of a listed business entity.

Source: ILPA

Rule 144 provides for the sale of restricted stock and control stock. Filing with the SEC is required prior to selling restricted and control stock, and the number of shares that may be sold is limited.

Source: ILPA

A safe harbor exemption from the registration requirements of Section 5 of the 1933 Act for resales of certain restricted securities to qualified institutional buyers, which are commonly referred to as "QIBs." In particular, Rule 144A affords safe harbor treatment for reoffers or resales to QIBs - by persons other than issuers - of securities of domestic and foreign issuers that are not listed on a U.S. securities exchange or quoted on a U.S. automated inter-dealer quotation system. Rule 144A provides that reoffers and resales in compliance with the rule are not "distributions" and that the reseller is therefore not an "underwriter" within the meaning of Section 2(a)(11) of the 1933 Act. If the reseller is not the issuer or a dealer, it can rely on the exemption provided by Section 4(1) of the 1933 Act. If the reseller is a dealer, it can rely on the exemption provided by Section 4(3) of the 1933 Act.

Source: ILPA

Provides an exemption from the registration requirements of the Securities Act of 1933 for intrastate offerings, if certain requirements are met. One requirement is that 100% of the purchasers must be from within one state.

Source: ILPA

Rule 501 of Regulation D defines Accredited Investor.

Source: ILPA

Company can raise up to $1 million in any 12-month period from any number or investors provided that the company does not advertise the sale. There are restrictions on the resale of the securities, but there is no requirement of disclosure. Investors need not to be sophisticated nor is any formal private offering memorandum required. However, offering is subject to the general antifraud provisions of the federal securities laws requiring that all material information be accurately presented to purchasers.

Source: ILPA

Rule 505 of Regulation D is an exemption for limited offers and sales of securities not exceeding $5,000,000. Company can raise up to $5 million in a 12-month period. Security sales can be made to an unlimited number of accredited investors plus 35 additional investors. Disclosure documents, i.e. a private placement memorandum, must be delivered to all non-accredited investors. If dealing with accredited investors, the number of these is unlimited, but there is no advertising allowed.

Source: ILPA