Investment term sheet: preferred shares
Term sheet for the investment in a company for preferred shares
What is an investment term sheet?
An investment term sheet is a written statement of the agreed terms for an investment in a company. The purpose of a term sheet is to agree the structure and material terms of a proposed investment prior to the preparation and negotiation of the full form investment documents.
A term sheet will usually not be legally binding, except in relation to:
- if agreed, exclusivity of negotiations
What are preferred shares?
Preferred (or preference) shares entitle the holder to certain preferred, or priority, rights over the holders or ordinary shares. Depending on the terms negotiated and in addition to the typical rights that an investor for ordinary shares may require, the preferred rights might include some or all of the following:
- dividend: prior right to dividends, usually by reference to an annual percentage on the amount invested for preferred shares. The preference dividend can be cumulative, which means that, to the extent not paid in any year due to the company not having sufficient distributable profits, the unpaid amount cumulates and remains payable as a preferred dividend
- liquidation preference: a prior right to payment on the sale or liquidation of company. The liquidation preference can be the amount subscribed for the preferred shares or a multiple of that amount
- conversion: right to convert preferred shares into ordinary shares by reference to a defined conversion rate
- anti-dilution: the right to receive either additional preferred shares or to adjust the conversion rate of preferred shares, in the event of a future issue of ordinary shares below a specified price (usually the subscription price paid for the preferred shares
- director: right for the holders of preferred shares to appoint a director
- consent matters: right for the holders of preferred shares to consent to certain specified matters
About this term sheet
This term sheet is for the investment for preferred shares in a private limited company.
- summary of investment terms, including pre-investment valuation and capital and number of new shares and price per share
- summary of investment process and principal investment documents
- range of preferred share rights
- exclusivity provisions
As with all of our document templates, your purchase will include access to clear explanatory guidance on the document and its use.
All Paper Rock legal templates are written by highly qualified English lawyers that are currently practising in the field of commercial and corporate law. The templates you download here reflect the same quality as if you’d instructed our lawyers to draft them for you. They also write all our document descriptions so you can rest assured every bit of information is legally accurate up to date.
Whatever your method of purchase, there is no limit to the number of times you can download your templates. However, many customers prefer to invest in an annual subscription. This offers exceptional value with unlimited downloads from our entire document library.
The Paper Rock team is available to answer questions via Live Chat during UK business hours. When live chat is unavailable, email email@example.com. We aim to respond to your emails within a 24-hour period. We also encourage you to ask questions via our social channels.