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Need to draft an Ordinary Shares Investment Term Sheet ?

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What is an Ordinary Shares Investment Term Sheet?

An Ordinary Shares Investment Term Sheet is a record of discussions between the founders of a business and an investor for a potential investment by ordinary shares. An Ordinary Shares Investment Term Sheet is not legally binding, except for confidentiality and exclusivity obligations (if applicable).

It is crucial that the parties have a good idea of the rights attached to (or any restrictions that apply to) the ordinary shares at an early stage of the discussion.

An Ordinary Shares Investment Term Sheet also sets out the parties’ preliminary thoughts on certain provisions to be included in a Shareholders’ Agreement, which will be executed at completion of the investment and which will protect the company’s or the shareholder’s interests.

Please note: if you are not familiar with how ordinary shares work or how an Ordinary Shares Investment Agreement operates, you must seek legal advice.

Key points included

  • Details of the subscription, including the price and number of shares to be subscribed for;
  • Pre-money valuation and round size;
  • Cap table;
  • Expected timeframe for execution of the definitive agreement and completion of the subscription;
  • Board composition after completion;
  • Generic conditions precedent;
  • Reserved matters and other provisions in shareholders’ agreement;
  • Confidentiality; and
  • Exclusivity (if applicable).

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