Legal Enforceability of Term Sheet
By Team Legistify / 2016-03-30
Despite not being legally binding, a term sheet is a document essential to both the company as well as the investor. It acts as an overview of all the critical terms that need to be negotiated between the parties. Having a clear view of the terms of an investment in one document gives an element of transparency to an otherwise complicated transaction. A term sheet may not even result in an investment, as negotiations may fall. Yet, it is crucial to have a document that represents the terms and conditions of the future transaction.

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Any initial planning process of a business starts with an agreement upon the terms of business which is what the 'term sheet' is responsible for. The term sheet is an announcement of what organisations or businesses plan to achieve by the understanding agreed between them, irrespective of what they what they agree for in the future.

What is a 'Term Sheet'

The term sheet is a document outlining the material terms and conditions of a business agreement between a startup and a potential investor. The arrangement of a business exchange, for the most part, begins with agreement upon the terms of business in the form of a 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.

With respect to how detailed a term sheet is generally, it is generally a relatively short document that an investor prepares for presentation to the company in which the investor states the investment that he is willing to make in the company. This is at the transaction stage and aides in getting down to business the last term of the agreement. You can consult the best startup lawyers in India to get your term sheet drafted as per the requirements of your startup.

Term sheet covers the following terms

Despite not being legally binding, a term sheet is a document essential to both the company as well as the investor. It acts as an overview of all the critical terms that need to be negotiated between the parties. Having a clear view of the terms of an investment in one document gives an element of transparency to an otherwise complicated transaction. A term sheet may not even result in an investment, as negotiations may fall. Yet, it is crucial to have a document that represents the terms and conditions of the future transaction.

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