Term sheet

What is Term Sheet & How it is Important?

A term sheet may likewise be referred as a letter of intent, an MOU i.e. memorandum of understanding. The first round of speculation from a financial investor is known as a Series a Term Sheet. Every round of investment has its own terms & conditions and these terms define a business seeking outside capital funding. The label isn't imperative, and regarding their structure and drafting they set out the key business and legitimate terms in regard to a proposed transaction.

In spite of the fact that investment term sheets are not merely legal binding but evidence to them, they simply confirm that once something has concurred in a investment term sheet, it might be troublesome for either side to renegotiate. Regardless of whether renegotiation is possible, you might be compelled to concede other matter of the deal which is essential to you. A renegotiation may even affect the mutual understanding of the parties. Investment Term Sheet are essential for both the financial investors &founders for various reasons, and you ought to take a lawful guidance before you sign them.

What are the key factors of the investment term sheet?

• Investment Term Sheet should allow both the parties to point any misunderstanding or issues,
• Investment Term Sheet should encourage the parties to focus on the business issues in the transaction at an early stage,
• It must enable key legitimate standards to be settled, which thus can be utilized as a system for drafting the legal transnational document,
• Investment Term Sheet figure out any conditions which should be fulfilled before legalizing the documentation,
• Investment Term Sheet contour the time for negotiation & finishing the transaction,
• Set out the binding components which have been concurred between the parties.

What must an Investment Term Sheet include for investing in a startup?

Before signing into a Investment Term Sheet, you ought to choose whether the document is authoritative, partially official or not official by any means. As an organizer, you should be careful about restricting commitments that prejudice your capacity to work with different financial specialists for a long time period and be more careful about an investor who imposes a penalty on you if for any reasons the terms of the letter are ruptured. If you are willing to get a formal legal advice on drafting a Investment Term Sheet, you may contact any member of our team. Let’s have a look at the following points with respect to an term sheet while investing in a startup:-

• Investment Term Sheet must include the proper details of the company, current directors as well as shareholders,
• Any rights concerning the investors or for particular founders must be included in Investment Term Sheet,
• Details regarding the invested funds must be mentioned in the Investment Term Sheet,
• If the investors have certain rights or reserved rights to take a major decision in the company should be included in Investment Term Sheet,
• If restrictions are on the activities of the founders then it should also be mentioned in Investment Term Sheet,
• Summary of the rights related to the transfer of share, or issues, or in case company is sold must be wound up.

Point to remember that Investment Term Sheet are non-binding which implies that they are only a method for moving along the procedure of negotiation with certain terms & conditions that open up the agreement for discussion. An Investment Term Sheet is basically a declaration of intent and not to be understood as an official understanding apart from the Confidentiality inside it.