Term Sheet – Foundation of Business Deals
What is a Term Sheet?
A Term Sheet is a preliminary, non-binding agreement that outlines the key terms and conditions of a proposed business transaction — such as investment, joint venture, acquisition, or funding round. It sets the stage for drafting legally binding agreements (like Shareholders’ Agreement, Share Purchase Agreement, or Investment Agreement).
Who Needs This?
Startups & Companies raising funds from investors, VCs, or PE firms.
Businesses entering into M&A deals (mergers, acquisitions, strategic alliances).
Joint Venture partners outlining rights and obligations.
Founders, Angel Investors, and Promoters negotiating shareholding and control terms.
Key Elements of a Term Sheet
Valuation of the company and investment amount.
Shareholding pattern & dilution.
Investor rights (voting, board seats, veto powers).
Exit options (IPO, buyback, secondary sale).
Dividend / liquidation preferences.
Pre-emption, tag-along, drag-along rights.
Confidentiality & exclusivity clauses.
Conditions precedent before investment/closing.
Why It Matters
Creates a clear roadmap for negotiations.
Prevents misunderstandings and disputes later.
Provides comfort to both investors and promoters.
Speeds up the drafting of final definitive agreements.
Process of Drafting & Finalizing a Term Sheet
Understanding objectives of both parties (investor and company).
Drafting key commercial terms & risk allocations.
Negotiation of valuation, rights, and obligations.
Finalization and signing of non-binding Term Sheet.
Move towards definitive legal agreements.
How Law to Corporate (LTC) Helps
Drafting customized term sheets tailored to your deal.
Assisting in negotiations with investors or counterparties.
Ensuring alignment with Indian company law, FEMA, SEBI, and tax regulations.
Smooth transition from term sheet → definitive agreements.
Protecting promoter interests while ensuring investor confidence.