Investment term sheet: ordinary shares
Term sheet 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
What is an investment term sheet?
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
What are ordinary shares?
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.
What are preferred shares?
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
- protection from dilution by future shares issues at lower valuations
- priority return in the event of a sale of the company or other capital return
- consent rights for specific matters reserved for preferred shareholders
About this term sheet
This term sheet is for the investment for ordinary shares in a private limited company.
Document features
Features include:
- 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
Explanatory guidance
As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.
Alternative investment term sheet
For an investment term sheet for preferred shares, see Investment term sheet: preferred shares.
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