Angels

Business angels are wealthy individuals or groups of wealthy individuals who invest largely in start-up companies, generally at the beginning of the lives of those companies or at their early stages. Business angel funding tends to be categorised within the term private equity (see below). Business angels can bring more than money, frequently also offering industry experience and useful contacts as well as sometimes joining the board as non-executive directors.

Annual General Meeting (AGM)

Every company (public or private), has to hold an Annual General Meeting (agm) every calendar year. There must be no more than 15 months between meetings. AGMs are designed to enable shareholders (particularly smaller ones as opposed to major institutional ones who tend to be kept better informed as a matter of course - certainly in the case of public companies) to question the board of directors and propose resolutions; in theory at least, to have their say. At the agm, the company's board of directors will usually explain the company's performance for the past financial year and give an indication of likely performance in the financial year to come. Shareholders in the company must be given a minimum of 21 days' notice of the holding of the agm along with a copy of the latest annual report and accounts. At the agm, the final share dividend is approved, the company's directors are elected (or re-elected) and the company auditors' fees agreed.

Alternative Investment Market (AIM)

Stock Exchanges are places where shares (securities, stock - see below) are bought and sold. The AIM is a junior cousin of the London Stock Exchange (LSE) (see below). It is designed to enable smaller, younger companies to raise new capital via a public listing without having to meet all the considerable listing requirements and associated costs of the much larger LSE. The AIM replaced the previous Unlisted Securities Market (USM) which had been intended to carry out the same function but was less than successful.

Authorised Share Capital

Every company needs capital (money) to operate. Capital comes in various forms - working capital, long-term debt, overdraft, et al, but much of it is raised by issuing shares. The authorised share capital is the maximum number of shares a company can issue. A company does not have to issue shares to the total amount of authorised share capital agreed. It may keep some in reserve though the total authorised share capital agreed can only be altered by a resolution of the shareholders. This part of the authorised share capital which has been paid for and issued to shareholders is known as issued share capital (see below) and the part which has not been paid for and issued is known as the unissued share capital.

BIMBO (Buy-in Management Buy-Out)

The history of the term 'Bimbo' is interesting - in American slang (c 1900) it originally meant a 'bozo' or tough guy, though its use these days is less politically correct. In corporate life, it means a combination of management buy-out (MBO) and management buy-in (MBI), see both, below.

BVCA (British Venture Capital Association)

The BVCA is the body representing most of the UK private equity (see below) industry. It provides training, research and publications, holds events and acts as a lobbying body on behalf of the industry and its members.

Chinese Walls

Conflicts of interest must always be avoided when advice is being offered. And 'insider dealing' is illegal. But in major financial institutions such as securities houses, particularly where there may be a number of departmental functions such as stockbroking, fund management, or market making, the possibility of conflicts is a real one in a given transaction. Chinese walls are the theoretical barriers erected between departments to try and avoid any such conflicts arising. Their effectiveness is questionable at times - as some recent headlines have demonstrated - in spite of their being patrolled by compliance officers rather than heavily armed Chinese guards keeping a weather eye out for Mongol hordes.

Dead Cat Bounce

The world of corporate finance is littered with unusual and occasionally colourful terms. Dead cat bounce is one of those and is based on the somewhat unsavoury if obvious premise that, assuming it is dropped from a sufficient height, even a dead cat will bounce when it hits the ground. The term refers to a temporary recovery in a falling stock market which does not mean that the downward trend is about to reverse. In other words, movement can be mistaken for signs of life.

Debentures

Companies can raise money by a variety of means from issuing shares, to overdrafts, to long-term debt. Anything other than the issue of shares generally comprises borrowing in one form or another. Debentures are simply a form of long-term borrowing either secured against some of the company's assets or, sometimes, unsecured. Debentures do not change value in line with a company's performance as shares generally do.

Dividends

Those elements of a company's earnings that are distributed to shareholders, in this country for listed companies, usually twice a year. The final dividend is approved at the company's agm (see above). Payment of ordinary dividends is not automatic and is recommended by the board of directors.

Due Diligence

Caveat emptor (buyer beware) holds true in any financial transaction. It would be a foolish investor who did not carry out some form of investigation (due diligence) into the risks attached to a proposed investment. Where someone is investing in a new or existing company or if a company is being taken over by another, then investigations are carried out to identify the potential risks involved in the particular transaction. Usually diligence will be undertaken on the financial performance and legal framework of the relevant business and, depending on the nature of the business may extend to environmental, pensions, market and other sector specific areas.