What is a term sheet?
A term sheet is a critical document, particularly for an Indian businessman. Months into negotiation and contract drafting, you may find out that there is no agreement on the basics of the contract. A term sheet solves this problem by putting into place a framework for the final contract. The term sheet, therefore, reflects the broad consensus of the parties on the material terms and conditions, such as price, quantity, valuation, due diligence and pre-emption.
In other words, The arrangement of a business exchange, for the most part, begins with agreement upon the terms of business in the type of term sheet. The term sheet is a declaration of what parties intend to accomplish upon by the agreement, instead of what they eventually concur upon. Term sheets are additionally called as ‘letter of intent’ or ‘side letter.’ Essentially, a side letter is a record that is auxiliary to another contract: clearing up, supplementing or changing the first contract. A letter of intent is utilized by the purchasers and merchants as a part of typical to celebrate their agreement on the material terms of exchange, for example, value, closing date, financing, due diligence and other essential arrangement focuses. This is at the transaction stage and aides in getting down to business the last term of the agreement. It is an all around settled guideline of the law of contract that such reports are not binding in nature. The terms of these letters might negative genuine contractual intention. A side letter of nature depicted just forces a commitment to the parties to negotiate in compliance with good faith and nothing more. Be that as it may, every now and again contain binding provisions governing confidentiality and marketing or negotiating exclusivity. A letter of intent, as the name suggests, is composed as a letter though a term sheet is all the more often a rundown of the critical parts of the foreseen contract or agreement.
Major Points in Term Sheet Document
- Written Legal Agreement between Founders and Investors
- Amount of Funding including Valuation
- Pre and Post Shareholding of Founders and Investors
- Main Business Activity of Funding Entity
- Reporting Requirements by Company to Investors
- Valuation of Company
- Cash Burn and Cash Inflow Rate
- Appointment of Directors in Funding Entity
- Changes in Articles of Association of Company
Procedure of Drafting of Term sheet Agreement
Step 1- You Place a Request for Drafting of Agreement
Step 2- Our Team Member will Call and Mail you Details for information Required and Pricing for Drafting of Agreement
Step 3- Payment of Fee ( First Installment )
Step 4- Drafting of Agreement and sent for your review
Step 5- We give Final Touch and Sent you for Signing
Step 6- Payment of Fee ( Final Installment )
Generally, term sheets are non- binding in nature, but they can become legally binding if executed on a stamp paper. The provision for its nature being non-binding can be inserted in the term sheet itself. Parties should be careful while drafting these documents at the negotiation stage.