Term Sheet - Investment
The Term Sheet Investment summarises the principal terms of a proposed investment by the Investor into the Company.
4.5 (2 reviews)
Last updated February 3, 2025
Under 10 minutes
Suitable for Australia
Written by
Edwin Montoya Zorrilla
Reviewed by
Damin Murdock
Document Overview
This document acts as a precursor document which can be used during the negotiation stages. Although it is not a legally binding document, except for clauses like confidentiality and exclusivity, it is useful to document your investment terms. This document serves as the foundation for the investment agreement and sets the stage for negotiations between parties.
A term sheet for investment helps to facilitate negotiations between the investor and the company. By outlining the proposed terms and conditions of the investment, the term sheet provides a starting point for negotiations and can help to identify areas where the two parties may have different expectations or priorities.
Additionally, by outlining the key terms of the investment in a clear and concise manner, the term sheet helps to ensure that both parties are on the same page and that there are no misunderstandings or surprises later on in the negotiation process.
Outlining the key terms of the investment upfront can also help to avoid lengthy negotiations and can help to ensure that both parties are able to move forward with finalising the investment agreement as quickly and efficiently as possible.
The Legal Risk Score of a Term Sheet - Investment Template
Our legal team have marked this document as medium risk considering:
- The document includes a clause that requires the company to negotiate exclusively with one investor for a specified period, which might limit the company's ability to explore potentially better investment opportunities during that time.
- There is a provision for the assignment of all intellectual property related to the business to the company, which could significantly impact the rights and future control of the founders over their own innovations.
- The document outlines that the investor will conduct further due diligence post-agreement, giving the investor a chance to back out based on new findings, which introduces uncertainty into the completion of the transaction.
Users familiar with investment agreements might find this document within expected risk parameters, but should remain cautious of the exclusive negotiation rights and the potential broad transfer of intellectual property rights.
Term Sheet - Investment Checklist
Complete your free Term Sheet - Investment with our checklist
Maintain Confidentiality
Adhere to the confidentiality requirements specified in the document, ensuring that "the contents of this Term Sheet and the fact that the Investor is considering entering into the Proposed Transaction is strictly confidential."
Follow Exclusivity Obligations
Respect the exclusivity period by negotiating solely with the Investor and not soliciting or responding to other inquiries as outlined under "Exclusivity."
Proceed with Due Diligence and Final Agreements
Allow the Investor to conduct further due diligence and work towards the execution of the subscription agreement and other definitive documents as detailed in sections "Timetable" and "Key Provisions in subscription agreement."
Use this Term Sheet Investment if:
- You are seeking potential investment or looking to sell your business.
- You are making negotiations with potential investors.
What does this Term Sheet Investment cover?
- Details of the contract including names of both parties, contract investment and summary specifics.
- Details of legal terms including investment, class of shares, employee share scheme, cap table, timetable, confidentiality, exclusivity and enforceability clauses.
- Key provisions in shareholders agreement such as details of appointment of director, drag along options, tag along options, vesting options and bad leaver buy back rights.
Further information
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