Streamline your contract management needs
Start today with GAIA - your new standard for legal management and get agreement tasks done efficiently!
We understand that navigating the legal landscape can be a daunting task, often consuming valuable time and resources that could be better used in achieving core business objectives. That's why we're committed to transform the way businesses handle their legal affairs, creating a streamlined and efficient experience.
A
AI Bias
Discriminatory AI behaviours due to biased data or algorithms.
AI Ethics
Principles guiding the ethical development and use of AI
AI Governance
Policies for responsible AI use within an organization.
AI Systems under the EU AI Act
An AI system is a machine-based system that: * Operates autonomously to some degree, * May adapt after deployment, * Processes inputs to generate outputs (e.g., predictions, recommendations), * Influences environments, whether physical or digital. Key Elements & Exclusions: * Includes both software and hardware, operating with varying autonomy and adaptiveness. * Excludes basic software, simple statistical models, and rule-based systems that do not learn.
Advanced Electronic Signatures (AES)
Require a level of identity verification and are based on certificates that uniquely identify the signer of the electronic document, often transmitted via a specific delivery service that can provide audit trails and other types of evidence about the transmitted data.
Artificial Intelligence (AI)
Artificial intelligence, or AI, is a technology that enables computers and machines to simulate human intelligence and problem-solving capabilities.
C
Cap Table
A cap table (capitalization table) is a detailed ledger that outlines the ownership structure of a company, listing shareholders, the types and number of shares they hold, and their percentage ownership. It is essential for tracking equity distribution, dilution, and financing rounds. Legal Functions of a Cap Table: 1. Ownership Transparency: Clearly defines who owns what percentage of the company, essential for decision-making and governance. 2. Investor and Founder Rights: Helps enforce shareholder agreements, voting rights, and liquidation preferences. 3. Fundraising and Valuation: Used by investors to assess dilution impact, company valuation, and equity stakes in financing rounds. 4. Regulatory Compliance: Ensures proper documentation for tax filings, securities regulations, and corporate law compliance. 5. M&A and Exit Planning: Provides clarity in acquisitions, IPOs, or secondary sales by outlining ownership stakes and rights. Cap tables evolve as companies raise capital, issue new shares, or grant stock options, making accurate record-keeping crucial for corporate governance and investor relations.
Capital Gains Tax
Capital gains tax is a tax imposed on the profit earned from selling capital assets, such as stocks, real estate, businesses, or other investments. The tax applies to the difference between the purchase price (cost basis) and the selling price of the asset
Contract Extraction
Contract Extraction refers to the process of identifying, retrieving, and structuring key information from legal contracts using manual, semi-automated, or AI-powered tools. The goal is to extract essential clauses, terms, obligations, dates, and financial details to improve contract management, compliance, and decision-making
Contract Lifecycle Management (CLM)
Contract Lifecycle Management (CLM) is a systematic process of managing the entire lifecycle of contracts within an organization. It covers the creation, execution, performance tracking, compliance management, renewal, and termination of contracts. CLM helps businesses streamline contract workflows, reduce risks, ensure regulatory compliance, and optimize contract performance.
D
Data Security
Data Security refers to the protection of digital data from unauthorized access, corruption, loss, or theft. It encompasses policies, processes, and technologies designed to safeguard data from cyber threats, breaches, and accidental exposure while ensuring compliance with legal and regulatory requirements.
Deep Fakes
AI-generated synthetic media, such as images, videos, or audio, that manipulate or replace real content using deep learning techniques, often to create realistic but false representations
Deep Learning
A subset of machine learning that uses multi-layered neural networks to automatically learn patterns and representations from large amounts of data
Document Lifecycle Management (DLM)
Document Lifecycle Management (DLM) refers to the systematic process of managing documents from their creation to their eventual disposal or archival. It ensures that documents are efficiently handled, securely stored, and accessible throughout their lifecycle while maintaining compliance with legal and regulatory requirements.
Dry Income
“Dry income” describes the situation where employees owe tax on shares or similar benefits before they have any cash to pay the bill. For example, if an employee is granted stock at a discount or for free, Germany’s previous rules required them to pay wage tax immediately, even though they couldn’t yet convert those shares into cash. Under the new Section 19a of the Income Tax Act (EStG), introduced through the Future Financing Act, tax can now be deferred until the employee actually sells the shares, preventing the problem of having to pay taxes without the necessary liquidity.
E
EU AI Act
A regulatory framework by the European Union that classifies and governs AI systems based on risk levels to ensure safety, transparency, and ethical use.
Employee Incentives
Employee incentives refer to a variety of programs designed to reward employees—often with equity or similar benefits—for their contributions to a company’s success. They can include traditional stock plans (ESOPs), Employee Incentive Programs (EIPs), or other share-based arrangements, all aiming to foster a stronger sense of ownership and motivation among staff. In Germany, many of these incentives benefit from the updated Section 19a of the German Income Tax Act (EStG), revamped by the Future Financing Act, which particularly helps small and medium-sized enterprises (SMEs). Through these rules, certain equity-based incentives allow employees to defer wage tax until they actually sell their shares, preventing “dry income” scenarios. When shares are granted at a discount (or free), the difference is generally taxed like regular salary, and any profit from a later sale is treated as a capital gain, typically at a 25% flat rate plus surcharges.
Equity / Equity Management
Equity refers to ownership interest in a company, typically represented by shares or stock. It signifies a shareholder’s stake in a business and entitles them to a portion of the company's profits, voting rights, and, in case of liquidation, residual assets after debts are paid. Whereas Equity Management is the process of overseeing and administering a company's ownership structure, including issuing, tracking, and maintaining records of shares, stock options, convertible securities, and other equity instruments. It ensures compliance with corporate governance, investor agreements, and tax regulations while optimizing stakeholder participation and funding strategies.
Exercise Price
Exercise Price vs. Strike Price The terms exercise price and strike price are often used interchangeably, but they can have slight distinctions depending on the context. Exercise Price (Stock Options Context) The exercise price is the pre-determined price at which an option holder can purchase company shares once their stock options vest. It is typically set at the fair market value (FMV) of the shares at the time the options are granted. • If the market price of the shares rises above the exercise price, the option holder can buy the shares at a discount. • If the market price is below the exercise price, the options remain "underwater" and are not worth exercising. Strike Price (Options Trading Context) The strike price is a term commonly used in financial derivatives trading and refers to the fixed price at which an options contract (e.g., call or put options in the stock market) can be exercised. Key Takeaway: For employee stock options (ESOPs) and startup equity plans, exercise price is the more commonly used term, while strike price is more frequent in public options trading. However, in practical use, they often mean the same thing—the price at which an option holder can buy the underlying shares.
Exit
What Is an Exit? An exit refers to the process through which investors, founders, or shareholders liquidate their equity in a company, typically by selling their shares or merging with another entity. Exits allow investors to realize returns on their investments and often mark the transition of a company to a new ownership structure. Typical Exit Scenarios: 1. Trade Sale (Acquisition) – The company is sold to a larger company, often a strategic buyer looking to expand its business or acquire technology, talent, or market share. 2. Initial Public Offering (IPO) – The company goes public by listing its shares on a stock exchange, allowing investors to sell shares on the open market. 3. Secondary Sale – Existing investors or founders sell their shares to new investors (e.g., private equity firms or other venture capitalists) without selling the entire company. 4. Management Buyout (MBO) – The company’s existing management team purchases the business from the current owners. 5. Liquidation – The company is dissolved, assets are sold, and proceeds are distributed to creditors and, if anything remains, to shareholders (usually considered a failure scenario). Most Common Exit Scenario The most frequent exit for startups is a trade sale (acquisition), as IPOs are rare and require significant scale. Many startups are acquired by larger companies looking for innovative technology, market access, or talent, making this the preferred exit route for both founders and investors.
Explainable AI (XAI)
AI systems that provide clear explanations for their decisions
F
FATML (Fairness, Accountability and Transparency in Machine Learning)
Refers to principles and research focused on ensuring ethical, unbiased, and explainable AI systems
Future Financing Act
The Future Financing Act (Zukunftsfinanzierungsgesetz – ZuFinG) is a German reform aimed at improving capital market access, boosting startup financing, and enhancing employee stock ownership schemes. It simplifies IPO procedures, lowers regulatory barriers for issuing securities, and expands electronic securities law to include tokenized assets. The act also enhances § 19a EStG, making stock options more attractive by allowing grants from group companies (Konzernklausel) and easing tax burdens. Additionally, it introduces incentives for venture capital investments and startup funding. Effective from 2024, it aligns Germany’s financial market with international standards to foster innovation and economic growth.
G
GPT (ChatGPT)
"GPT" in ChatGPT stands for "generative pre-training transformer," which describes the method it uses to process and generate language
General Data Protection Regulation (GDPR)
The General Data Protection Regulation, abbreviated GDPR, is a European Union regulation on information privacy in the European Union and the European Economic Area
Generative AI
AI systems that create new content based on patterns learned from data
Grace Period
The grace period in the context of new legislation refers to a set timeframe after a law is enacted during which compliance is not strictly enforced or penalties are not applied. This period allows individuals, businesses, and other affected entities to adapt to the new legal requirements without facing immediate legal consequences. Grace periods are commonly used to ensure a smooth transition, providing time for awareness, implementation, and adjustments before full enforcement begins. The length and conditions of the grace period vary depending on the specific legislation and jurisdiction.
Group Clause
The Konzernklausel (Group Clause), introduced in the Annual Tax Act 2024, extends tax deferral benefits under § 19a EStG to employee equity grants not only in the direct employer company but also in affiliated group entities (e.g., parent or sister companies). This change enhances flexibility in equity-based compensation, making Germany’s incentive framework more internationally competitive, provided the parent and subsidiary meet certain size thresholds.
H
Hallucinations
Incorrect or misleading results that AI models generate that are nonexistent or imperceptible to human observers
I
Income Tax (Personal Income Tax), Wage Tax
Personal income tax is a tax levied on an individual's earnings, including wages, salaries, investments, and other income sources. While income tax and wage tax are related, they are not always interchangeable: • Income tax is a broad term that applies to all taxable income, including wages, self-employment earnings, rental income, and capital gains. • Wage tax specifically refers to tax withheld from an employee’s wages by the employer and paid directly to the tax authorities. It is a type of income tax but applies only to employment income. In many countries, wage tax is essentially a prepayment of income tax, with the final tax liability determined after filing an annual tax return.
Inference
The process of using a trained machine learning model to make predictions or decisions based on new, unseen data
L
Large Language Models (LLMs)
AI models trained on extensive text data, capable of generating text that sounds human
M
Machine Learning (ML)
A subset of AI that allows systems to learn from a set of data without being explicitly programmed
N
Natural Language Processing
AI focused on understanding and generating human language.
Non-Disclosure Agreements (NDAs)
A Non-Disclosure Agreement (NDA) is a legally binding contract that establishes a confidential relationship between parties, restricting the disclosure of sensitive or proprietary information to third parties. NDAs are commonly used in business transactions, employment agreements, and partnerships to protect trade secrets, intellectual property, and other confidential data.
P
Pooling of Shares
Pooling of shares refers to an agreement among multiple shareholders to collectively vote or transfer their shares as a single bloc, often through a shareholders' agreement or a voting trust. This mechanism is commonly used in corporate governance, mergers, and financing arrangements to consolidate voting power or ensure strategic alignment among shareholders. Legal Functions of Pooling Shares: 1. Strengthening Control: Shareholders, particularly minority investors, can combine their voting rights to influence corporate decisions, board elections, or mergers. 2. Investor Protection: In venture capital or private equity deals, founders and key investors may pool shares to prevent premature sales that could affect company stability. 3. Pre-Agreed Exit Strategies: Pooling can facilitate structured exits by requiring shareholders to sell their shares together under predetermined terms (e.g., drag-along and tag-along rights). 4. Compliance with Regulatory Requirements: Some jurisdictions require pooling agreements for share transfers to comply with foreign investment laws or stock exchange regulations. Pooling agreements are legally binding contracts and may be structured as voting agreements, trusts, or nominee arrangements, depending on jurisdictional laws and shareholder objectives.
Predictve AI
A type of artificial intelligence that analyzes data patterns to forecast future outcomes, trends, or behaviors
Profit Participations Rights
Profit participation rights are flexible instruments under German law, allowing the holder to share in a company’s profits (and potentially exit proceeds) without gaining formal shareholder status or voting rights. Because they do not dilute control, companies can tailor these agreements to align financial incentives with business goals. However, holders often need to make an upfront cash contribution, bearing direct investment risk. Determining the participation terms typically requires individual valuation, legal agreements, and coordination with tax authorities—all of which increase complexity and cost. Due to their highly customized nature and lack of standardization, profit participation rights can involve significant administrative efforts and ongoing valuations.
Prohibited AI Practices under Article 5 of the EU AI Act
AI systems which pose inherent risks to fundamental rights, including: * Manipulation & deception affecting decision-making. * Exploitation of vulnerabilities (age, disability, socio-economic status). * Social scoring with discriminatory consequences. * Predictive crime assessment based solely on profiling. * Unauthorized facial recognition data scraping. * Emotion recognition in workplaces & schools (except for safety/medical use). * Biometric categorization based on sensitive characteristics (race, religion, etc.). * Real-time biometric surveillance in public spaces, except for specific law enforcement cases. * Exemptions apply to national security, defense, R&D, and open-source AI unless classified as high-risk or prohibited.
Prompt Engineering
Designing effective instructions to guide AI models in generating desired outputs
Qualified Electronic Signatures (QES)
Qualified signatures require a certificate based on properly issued public keys and identity verification by an audited QTSP, either remotely via video chat or in person.
R
Responsible AI
Ethical, transparent AI development and deployment
S
Service Level Agreement (SLA)
Contract between a service provider and a customer that defines the service to be provided, the level of performance to be expected, how performance will be measured and approved, and what happens if performance levels are not met
Simple Electronic Signatures (SES)
Data in electronic form, which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign.
Smart Contracts
A Smart Contract is a self-executing contract in which the terms of the agreement are directly written into lines of code and automatically executed when predefined conditions are met. Smart contracts run on blockchain technology, ensuring transparency, security, and immutability.
Stock Option
What Are Stock Options? Stock options are a form of equity-based compensation that give an employee, investor, or other stakeholders the right (but not the obligation) to buy company shares at a predefined price (exercise or strike price) after a specific vesting period. They are commonly used to attract and retain talent, aligning employee incentives with company growth. Key Features of Stock Options: 1. Grant Date: The date on which the stock options are awarded. 2. Vesting Period: A timeframe during which the recipient must stay with the company before they can exercise the options. 3. Exercise Price: The price at which the recipient can purchase the shares, usually set at the market value at the time of grant. 4. Expiration Date: A deadline by which the options must be exercised before they become void. 5. Liquidity Event Requirement: In some cases, options can only be exercised after an IPO or acquisition.
Strike Price
The terms exercise price and strike price are often used interchangeably, but they can have slight distinctions depending on the context. Strike Price (Options Trading Context) The strike price is a term commonly used in financial derivatives trading and refers to the fixed price at which an options contract (e.g., call or put options in the stock market) can be exercised. Exercise Price (Stock Options Context) The exercise price is the pre-determined price at which an option holder can purchase company shares once their stock options vest. It is typically set at the fair market value (FMV) of the shares at the time the options are granted. • If the market price of the shares rises above the exercise price, the option holder can buy the shares at a discount. • If the market price is below the exercise price, the options remain "underwater" and are not worth exercising. Key Takeaway: For employee stock options (ESOPs) and startup equity plans, exercise price is the more commonly used term, while strike price is more frequent in public options trading. However, in practical use, they often mean the same thing—the price at which an option holder can buy the underlying shares.
Synthetic Data
Artificially created data that mimics real-world data
T
Tax Ruling
What Is a Tax Ruling in Germany? In Germany, a tax ruling ("verbindliche Auskunft") is a binding advance decision issued by the German tax authorities (Finanzamt) upon request. It clarifies how tax laws will be applied to a specific case before a taxpayer carries out a transaction, providing legal certainty and reducing the risk of disputes. Key Features of a Tax Ruling in Germany: 1. Binding Effect: The ruling is legally binding only for the specific local tax authority if the taxpayer follows the described facts exactly. 2. Scope: Used mainly for complex tax matters, such as corporate restructurings, complex employee participation structures, and investment planning. 3. Application Process: ◦ Must be submitted in writing to the responsible tax office. ◦ The taxpayer must provide a detailed description of the facts and a legal assessment of the tax implications. ◦ A fee ("Gebühr") is charged, depending on the complexity of the ruling. 4. Legal Basis: Governed by § 89 AO (Abgabenordnung, German Fiscal Code). Practical Use: • Frequently used in corporate tax planning, M&A transactions, and international tax matters (e.g., transfer pricing, withholding tax issues). • Helps avoid tax risks and ensures transactions are structured in compliance with German tax law. Tax rulings are particularly valuable for businesses operating in unclear or gray areas of tax regulation, providing a level of security before making financial decisions.
Token limits
Restrictions on the number of tokens that an LLM can process in a single interaction
Tokens
Tokens are the basic units of input and output in a language model - meaning human language transformed into sections, that are understandable by AI models
V
Vesting Period
What Is a Vesting Period? A vesting period is the timeframe during which an employee, founder, or investor must remain with a company before gaining full ownership rights to stock options, restricted shares, or other equity incentives. Key Aspects of Vesting Periods: • Purpose: Encourages long-term commitment and retention. • Typical Duration: Often 4 years with a 1-year cliff, meaning no equity vests in the first year, but after 12 months, a portion (e.g., 25%) becomes available, followed by monthly or quarterly vesting thereafter. • Types of Vesting: ◦ Time-Based Vesting: Ownership accrues over time (e.g., monthly or yearly). ◦ Milestone-Based Vesting: Equity vests upon reaching specific goals (e.g., revenue targets, IPO, or acquisition). Vesting ensures that equity incentives serve their intended purpose—aligning stakeholders' interests with the company’s long-term success.
eIDAS Regulation (electronic IDentification, Authentication and Trust Services)
An EU regulation with the stated purpose of governing "electronic identification and trust services for electronic transactions”
Start today with GAIA - your new standard for legal management and get agreement tasks done efficiently!