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?
- for an indemnity clause to be included in a contract
- for a contract governed by English law
What are the key features?
- alternative forms of indemnity wording:
- indemnity from one party in favour of the other party
- mutual indemnity from both parties in favour of the other
- indemnity for breach of the underlying contract
- indemnity for potential loss arising from a third party claim
- wording for conduct of third party claims
What else do I need to know?
An indemnity is a contractual undertaking given by one party (the indemnifier) in favour of another party (the indemnified party or beneficiary) under which the indemnifier agrees to pay to the indemnified party the amount of any loss or damage which the indemnified party suffers as a consequence of a specified event.
The specified event might be:
- the breach of contract by the indemnifier
- liability of the indemnified party to a third party in relation to a specified event or circumstance
- a claim by a third party for loss or damage caused by the indemnifier’s breach of contract
Unlike other contractual obligations (and depending on the wording of the indemnity), an indemnity is not subject to legal rules and limitations regarding to the foreseeability of loss or the remoteness of damages which can be recovered by the beneficiary. In addition, the beneficiary is not legally obliged to mitigate its loss.
As a result and in exchange for agreeing to give the indemnity, the indemnifier may require that the beneficiary takes certain actions in relation to a claim or event which might give rise to a claim under the indemnity being made. These actions include:
- the notification of a claim from a third party in relation to the indemnified obligation
- an obligation on the indemnified party to take action required by the indemnifier to defend a third party claim
- allowing the indemnifier to take legal action in the name of the indemnifier to defend the third party claim
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Updated by a lawyer on 21/07/2025
- Updated By a lawyer on
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