Investor Term Sheet Template With Confidentiality Statement In Clark
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FAQ
A term sheet (also known as a letter of intent, memorandum of understanding or heads of agreement) sets out the key commercial and legal terms of a proposed transaction. It's usually (but not always) a precursor to formal contractual documentation being prepared and signed by the relevant parties.
Although the term sheet itself is not typically legally binding, some term sheets contain certain legally binding provisions (for example, confidentiality or exclusivity).
A "bad" term sheet could leave an entrepreneur without control of their company at the earliest stages of starting up, forcing them into losing major chunks of their equity, and even blowing up future deals with new investors.
Exclusivity - This is a standard condition that requires that you don't talk to other investors for a specific period after you sign the term sheet and while the investor is doing their due diligence. But be sure the time period isn't too long - 30-45 days is about right.
Term sheets evidence serious intent but are generally not legally binding.
“Term sheets”, “letters of intent”, “memoranda of understanding” and “agreements in principle” may constitute an enforceable agreement if the writing includes all the essential terms of an agreement. This is so even if “the parties intended to negotiate a 'fuller agreement'”.
How to Prepare a Term Sheet Identify the Purpose of the Term Sheet Agreements. Briefly Summarize the Terms and Conditions. List the Offering Terms. Include Dividends, Liquidation Preference, and Provisions. Identify the Participation Rights. Create a Board of Directors. End with the Voting Agreement and Other Matters.
If the term sheet contains exact figures and dates, clear obligations and there is nothing left to ponder (with respect to the items contained in the term sheet) then it's highly likely that it will be regarded as legally binding.
