Investment term sheet: ordinary shares
Investment term sheet template for the investment for ordinary shares in a private limited company. It outlines the principal investment terms on a non-legally binding basis and contains optional legally-binding provisions covering confidentiality, exclusivity and costs.
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When do I use this document?
- for a proposed investment for ordinary shares in a private limited company
- to set out the principal agreed terms for the investment on a non-legally binding basis
- as a preliminary step before preparing long form investment agreements
- to save time and future discussion and negotiation on the transaction documents
What are the key features?
- clear and user-friendly format
- table structure with explanatory commentary in the guidance note on alternative options for consideration and discussion
- comprehensive term sheet covering matters including:
- investment terms, including pre-investment valuation and pre and post-investment capital
- investment amount and investor shares
- key terms of investment agreement
- investor director appointment rights
- investor consent matters, including schedule of reserved matters
- future share issues and transfers of shares
- legally binding provisions covering:
- confidentiality of investment terms
- exclusivity for the investor for a defined period
- fees
- governing law and jurisdiction
- share capital table
What else do I need to know?
An investment term sheet is a document setting out the agreed terms for a potential investment in a company. Its purpose is to set out the agreed structure and material terms of the proposed investment prior to the preparation and negotiation of the full form investment documents.
A term sheet will usually not be legally binding, except for:
- confidentiality of the investment terms
- if agreed, exclusivity of negotiations
- costs
- governing law and jurisdiction of the legally-binding sections
Ordinary shares are:
- voting shares
- shares entitling the holder to receive a proportionate share of dividend income
- shares entitling the holder to receive a proportionate share of capital returns
If an investor invests in ordinary shares, the investor will usually receive the same class of shares as the founders and other shareholders in the company.
Preferred (or preference) shares are shares which have certain preferred rights in priority to the company’s ordinary shares. To reflect the investment risk, an investor may require preferred shares rather than ordinary shares. Typical rights of preferred shares include:
- priority rights to dividends
- anti dilution protection in case of future shares issues at lower valuations
- liquidation preferences – a priority return in the event of a sale of the company or other capital return
- consent rights for specific matters reserved for preferred shareholders
What other documents are available?
For an investment term sheet for preferred shares, see
When do I use this document?
- if a shareholder has lost its original share certificate or it has been destroyed
- if applicable, alongside a transfer of the shares covered by the lost or destroyed original certificate
What are the key features?
- different forms of indemnity, depending on whether the shareholder is also transferring shares
- alternative forms of indemnity, depending on whether the shareholder is an individual or a company
What else do I need to know?
What is a share certificate?
A share certificate is a document evidencing ownership of shares in a company. By law, shareholders are entitled to receive this certificate when they acquire shares, either through allotment or transfer.
What happens if a share certificate is lost or destroyed?
If a shareholder loses or destroys their certificate, they can ask the company for a replacement. To safeguard itself, the company will usually require a lost share certificate indemnity. This is a legal undertaking under which the shareholder agrees to cover any losses the company might face by issuing the replacement.
What risks does the indemnity protect against?
The indemnity protects the company from risks such as:
- Duplicate Claims: If the original certificate reappears, someone else might claim ownership, causing disputes or financial loss.
- Fraudulent Claims: A person could falsely claim to have lost the certificate and misuse the replacement, for example, by attempting to sell the shares unlawfully.
- Administrative Errors: Mistakes in issuing a replacement or registering a transfer without the original certificate could lead to legal administrative errors.
- Legal Liability: If a replacement certificate or transfer is improperly handled, the company might be held responsible for resulting losses.
£35.00 exc VAT
Updated by a lawyer on 21/07/2025
- Updated By a lawyer on
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