Reference
Plain-English definitions of the commercial law terms Folio uses across primers and briefings. Sourced from the same key-terms blocks that appear inside each primer, pulled out here as standalone reference pages.
AI Governance
The internal policies, processes, and controls an organisation puts in place to manage the development, procurement, and use of AI systems responsibly.
Algorithmic Bias
Systematic errors in AI decision-making that produce unfair outcomes for particular groups, often reflecting biases present in training data.
Arbitral Award
The binding decision issued by an arbitral tribunal, enforceable internationally under the New York Convention.
Bankability
Whether a project's risk profile and contractual framework are acceptable to lenders for the purpose of providing project finance.
BIT (Bilateral Investment Treaty)
An agreement between two states establishing protections for foreign investors, including rights to fair treatment and compensation for expropriation.
Bookbuilding
The process of gauging investor demand at different price levels to determine the final offer price of an IPO or bond.
Carbon Credit
A tradeable certificate representing the right to emit one tonne of carbon dioxide, used in compliance and voluntary carbon markets.
Completion Accounts
A price adjustment mechanism where the final purchase price is determined by accounts drawn up shortly after completion, reflecting the target's actual financial position.
Condition Precedent
A requirement that must be satisfied (e.g., regulatory approval) before the parties are obliged to complete the transaction.
Consumer Duty
The FCA's overarching standard requiring firms to act to deliver good outcomes for retail customers, covering products, price, understanding, and support.
Coupon
The periodic interest payment made to a bondholder, expressed as an annual percentage of the bond's face value.
Covenant
A binding promise in a bond's terms restricting the issuer's conduct (e.g., caps on additional debt) to protect investors.
Deepfake
Synthetic media — typically video or audio — generated by AI to convincingly depict events that did not occur, raising concerns in fraud, evidence, and defamation.
Disclosure
The process by which each party to litigation reveals to the other the documents relevant to the issues in dispute.
Due Diligence
The investigation process where a buyer examines a target's legal, financial, tax, and commercial position before committing to a transaction.
EPC Contract
An Engineering, Procurement, and Construction contract under which a single contractor takes responsibility for delivering a project to a fixed price, time, and specification.
EU AI Act
The European Union's comprehensive regulation classifying AI systems by risk level and imposing corresponding obligations on developers and deployers.
Explainability
The degree to which the internal logic of an AI model can be understood and communicated to humans — a key requirement for high-risk AI under many regulatory frameworks.
Export Controls
Laws restricting the export of military, dual-use, and sensitive goods and technology to certain destinations or end-users.
Facility Agreement
The core lending contract between borrower and lenders, setting out the terms of the loan including amount, interest rate, repayment schedule, covenants, and events of default.
FCA (Financial Conduct Authority)
The UK regulator responsible for the conduct of financial services firms and the integrity of financial markets.
Financial Covenant
A clause requiring the borrower to maintain specified financial ratios (e.g., leverage, interest cover) tested at regular intervals, breach of which constitutes an event of default.
Force Majeure
A contractual clause excusing performance when extraordinary events beyond the parties' control (war, natural disaster, pandemic) make it impossible or impracticable.
Free Float
The proportion of a listed company's shares that are available for public trading, excluding shares held by insiders or strategic investors.
Freezing Order
A court order preventing a party from dealing with or dissipating its assets, designed to preserve funds for a potential future judgment.
FSMA (Financial Services and Markets Act 2000)
The primary legislation governing the regulation of financial services in the UK, establishing the framework within which the FCA and PRA operate.
Indemnity
A pound-for-pound reimbursement obligation for a specific identified risk, offering stronger protection than a warranty claim.
Injunction
A court order compelling a party to do something (mandatory) or refrain from doing something (prohibitory), breach of which is contempt of court.
Intercreditor Agreement (ICA)
A contract between different classes of lender governing priority of repayment, rights to enforce security, and conduct during a restructuring — critical in leveraged deals with multiple debt tranches.
IPO (Initial Public Offering)
The first sale of a company's shares to the public, marking its transition from a private to a publicly listed entity.
ISDS (Investor-State Dispute Settlement)
The arbitration mechanism through which foreign investors bring claims against host states under bilateral or multilateral investment treaties.
Large Language Model (LLM)
An AI system trained on vast text datasets to generate, summarise, and analyse human language — the technology behind tools like ChatGPT and legal AI assistants.
Leveraged Buyout (LBO)
An acquisition funded predominantly with borrowed money, typically by a private equity sponsor, where the debt is secured against the acquired company's assets and cash flows.
LMA (Loan Market Association)
The trade body that publishes standard-form loan documentation used as the starting point for most European syndicated loan and leveraged finance transactions.
Locked Box
An alternative pricing mechanism where the price is fixed by reference to a set of accounts at an agreed date before signing, with protections against value leakage.
Material Adverse Change (MAC)
A clause allowing a buyer to walk away if a significant negative event affects the target between signing and completion — heavily negotiated and rarely invoked.
Model Risk
The risk of adverse consequences arising from decisions based on AI or statistical models that are incorrect, misused, or inadequately understood.
PPA (Power Purchase Agreement)
A long-term contract between an energy generator and a buyer, fixing the price and volume of electricity to be supplied — essential for project bankability.
PRA (Prudential Regulation Authority)
The Bank of England subsidiary that supervises the financial safety and soundness of banks, building societies, insurers, and major investment firms.
Pre-Action Protocol
Rules requiring parties to exchange information and attempt settlement before issuing court proceedings, with cost penalties for non-compliance.
Prospectus
A legal document disclosing all material information about the issuer and the offering, required for public offers of securities.
Sanctions
Restrictions imposed by governments on trade, financial transactions, or dealings with specific countries, entities, or individuals for foreign policy or security reasons.
SAR (Suspicious Activity Report)
A report filed with the National Crime Agency when a firm knows or suspects that a transaction or activity involves the proceeds of crime or terrorist financing.
Seat of Arbitration
The legal jurisdiction governing the arbitration proceedings (as distinct from the physical venue), determining the courts with supervisory jurisdiction.
Security Package
The bundle of charges, pledges, and assignments granted by the borrower and its group companies over their assets in favour of lenders, providing collateral for the loan.
SONIA
The Sterling Overnight Index Average — the near risk-free benchmark interest rate that replaced LIBOR for sterling lending, based on actual overnight transactions in the sterling money market.
SPA (Share Purchase Agreement)
The primary contract governing the sale and purchase of shares in a target company, setting out price, warranties, and completion mechanics.
SPV (Special Purpose Vehicle)
A legally separate entity created to isolate the financial risk of a specific project, so that the sponsor's other assets are not exposed if the project fails.
Syndicated Loan
A loan provided by a group of lenders (the syndicate), coordinated by an arranging bank, spreading the credit risk of a large facility across multiple institutions.
Third-Party Funding
An arrangement where an external funder finances a party's legal costs in exchange for a percentage of any damages recovered.
Training Data
The dataset used to teach an AI model to recognise patterns and generate outputs — its quality and composition directly determine the model's capabilities and biases.
Transfer Pricing
The rules governing how transactions between related entities in different jurisdictions are priced, designed to prevent profit shifting to low-tax jurisdictions.
UK GDPR
The UK's retained version of the EU General Data Protection Regulation, governing the processing of personal data by organisations operating in the UK.
UK MAR (Market Abuse Regulation)
The UK regulation prohibiting insider dealing, unlawful disclosure of inside information, and market manipulation in respect of financial instruments.
Underwriting
The commitment by an investment bank to purchase all or part of a securities offering, guaranteeing the issuer raises its target funds.