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Term sheet for Investment


A term sheet is a non-binding agreement that outlines the fundamental terms and conditions of a new investor. The term sheet is a template that acts as the foundation for more specific, legally binding papers.
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Overview

The term sheet should address the important components of a deal without going into great detail about every minor possibility that would be covered by a binding contract.

The term sheet effectively establishes the framework for ensuring that all important features of a commercial transaction are agreed upon by all parties involved.

The term sheet decreases the chances of a miscommunication or unwanted conflict. Furthermore, the term sheet guarantees that cost of legal fees associated with drafting a formal agreement or contract are not expended too soon.

All term sheets include information on the assets, the original purchase price, as well as any contingencies that may impact the price, a response timeframe, and other important details.



Benefits of Term sheet for Investment

There are several significant advantages to using term sheets for investment.

Checklist/Requirements

Term sheet for Investment

Why Choose Us

  Entrepreneur Friendly

We make the process so easy and fast that you will not even feel the headache of all the paperwork, and our professionals will provide you all the promised deliverable within a given span of time.

  Experienced Professionals

All our professionals are qualified and specialized in that particular work. Making sure no mistakes are done at the time of filings with the authorities so that company won’t have to pay any penalties due to mistakes.

  One Stop for All Your Requirements

We support you throughout the journey of your business, from the incorporation, Accounting and taxation support, Secretarial compliance support, and Legal support.

  Cost-Effective

We believe that cost plays a vital role in any company’s growth stage, that’s why we do not surprise our clients with hidden charges, you pay what you see in the initial proposal.


Frequently Asked Questions


What are the investors rights in Term Sheet?
Pro Rata Rights: An investor's right to participate in additional investment. When further funding is needed, the investor can keep the same percentage of ownership in the company. Pro rata rights are usually beneficial to the organization because they provide some assurance about future funding.

Voting Rights: the right granted to a shareholder to participate in company decisions. In most circumstances, only common stock shareholders have voting rights. Despite the fact that preferred stock owners (most venture capitalists) do not have voting rights, they may demand a say in board decisions.

Information Rights: It refers to the information that a venture capitalist expects the company to provide on a regular basis, such as financial statements, budgets, and other documentation.
  • It is nonbinding: Neither the entrepreneur nor the VC is legally bound to follow the terms of the term sheet.
  • Anti-dilutive provisions, company valuations, investment amounts, stake percentages, and anti-dilutive provisions should all be properly stated.
  • Startups seeking finance are frequently at the mercy of venture capitalists (VCs) looking to maximise their investment return. This might lead to the investor requesting and receiving undue influence over the company's direction.
  • Preference for liquidation: The term sheet should spell out how the sale revenues will be split between the entrepreneur and the investors.
  • Whether the investor will have a seat on the board of directors, how many seats the investor will have, and whether the seats will be voting or non-voting.
  • Regular financial statements disclosures.
  • Existing shareholders' pro rata rights, which specify how they will participate in any future capital raise. This is done to ensure that the first investor's interest is not diminished in subsequent investment rounds with additional investors.
  • Confidentiality provision
  • A period of exclusivity/“no-shop” ranging from 30 to 90 days.
    • An investor may choose to use binding terms for the duration of time once the term sheet is signed, such terms shall be binding upon the parties.
    It is a non binding agreement. Although a term sheet is not generally considered to be legally binding, there are certain conditions in the term sheet that may be legally binding once signed. An investor may choose to use binding terms for the duration of time once the term sheet is signed