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TERM SHEET
A term sheet is a generally non-binding agreement that captures the basic terms and conditions of an investment.
The term sheet serves as a template and basis for more detailed, legally binding documents. Once the parties involved reach an agreement on the details laid out in the term sheet, a binding agreement or contract that conforms to the term sheet details is drawn up.
Contents of Term Sheet
The following clauses form part of a well drafted Term Sheet:-
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Name of the company in which the investment is being made
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Type of security to be issued
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Conversation rate of convertible securities
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Veto rights
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Founder’s lock-in
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Drag along
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Tag along
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Right of first refusal (ROFR)
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Right of first offer (ROFO)
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Reps & Warranties
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Exit rights
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Governing law an
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d Dispute Resolution
Laws governing Term Sheet in India
The different laws which govern various aspects of Term Sheet in India are as follows:
- Companies Act, 2013 and various rules framed thereunder
- The Indian Contract Act, 1872
- Foreign Exchange Management Act, 1999
- Consolidated FDI Policy, 2020
- RBI Policies
- Competition Act, 2002
- SEBI Guidelines (in case of listed company)
Why LegalKart?
- Senior Corporate Expert Lawyers: We will get your document drafted/reviewed by Senior Expert Corporate lawyers. You can track the progress of your document on our platform at all times.
- 4.5 Customer Score: Clients are delighted with our service! They have consistently rated us high because of our focus on delivering quality output and providing regular updates.
- Responsible Delivery: Our team of experienced business advisors are just a phone call away. Our team will ensure that your interaction with the expert lawyer is smooth and seamless and the document draft is delivered to you within the committed timeline.
Deliverables
Our standard deliverables for every document drafting includes:
- 60 Minutes of Talk-Time with the Lawyer for drafting/reviewing the Agreement
- First draft of the documents will be delivered to you within a maximum of 2 working days
- Post-delivery of the first draft – Iterations in the master Document to incorporate your suggestions/changes
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Frequently Asked Question
Who prepares and presents the Term Sheet?
Usually, it is the investor who presents the Term Sheet to the founders of the investee company.
Is Term Sheet always non-binding?
A Term Sheet is usually non-binding document by the very nature of it. With that being said, nothing stops the parties from entering into a binding Term Sheet.
In fact, a few clauses of the Term Sheet, such as governing law and dispute resolution, NDA, etc. are usually kept binding.
How is Term Sheet used?
A term sheet is an agreement that is executed between the prospective investor and the company.
It is usually entered into before the process of due diligence begins and it lays a foundation on which the more definitive documents, such as Share Subscription and Shareholder's Agreement are prepared at a later stage.
What happens after the parties have executed Term Sheet?
After the parties have executed the Term Sheet, the lenghty and crucial process of due diligence follows on the investee company, and afterwards, the parties enter into more definitive documents, such as Shareholder's Agreement, to give legal and binding effect to the investment.
Is it mandatory to enter into a Term Sheet?
No. It is not mandatory to enter into a Term Sheet.
However, most investors and founders prefer to enter into a Term Sheet that lays out the foundation of the major terms, upon which the definitive documents are later prepared.
What our users have to say
I was planning to buy a plot in Nagpur. Before buying the land, I wanted to get all the documents verified and ensure it is free of fraud and forgery. LegalKart undertook every step carefully and their team was very responsive. I am impressed by their professionalism and would highly recommend their service.
Kishore Kamble, Pune
I had purchased a flat in Bangalore. The builder had delayed possession from the committed date. I was paying a high EMI and rent which increased my monthly cash outflow and this left me with no money at the end of the month. I was very stressed and didn’t know what to do. I came across LegalKart and their Property Expert Lawyer advised me to send a legal notice to the Builder and also appeal to the RERA for the delayed possession. I got compensation from the builder for the delay and finally also got possession of my flat.
B. Sivakumar, Bangalore
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