Frequently Asked Questions
A term sheet is a contract that is signed by the potential investor and the business.
It is typically signed before the due diligence process starts, and it establishes the framework for the preparation of more binding papers like the shareholder agreement and share subscription.
By its very nature, a Term Sheet is often a non-binding agreement. Having said that, nothing prevents the parties from signing a legally enforceable Term Sheet. In actuality, a few Term Sheet provisions, such as those relating to governing legislation, dispute resolution, an NDA, etc., are often remained in force.
After the parties have signed the Term Sheet, a lengthy and important process of investigating the investee firm takes place. Subsequently, the parties engage into other contractual papers, including the Shareholder’s Agreement, to give the investment its legal and binding impact.
No. Entering into a Term Sheet is not required.
However, the majority of investors and founders prefer to sign a term sheet, which outlines the key terms, after which the final paperwork are drafted.
The Term Sheet is often given to the investee company’s founders by the investor.