The Term Sheet for an Investment Contract (in English Investment Term Sheet) is a letter of intent with which the parties establish some points on which a general agreement has been reached and regulate how to continue the subsequent negotiations relating to a future investment agreement. with one or more investors interested in entering a company.
The Term Sheet is not binding and does not oblige the parties to sign the final agreement. The parties can in fact link the outcome of the negotiation to specific conditions (outcome of due diligence, problematic accounting checks, etc.). In any case, the negotiation must be carried out according to fairness and good faith, in order not to incur a “pre-contractual liability” (for example in the event that there is an unjustified renunciation of the final agreement).
When using the investment term sheet
The Term Sheet is used for the entry into the capital of a SRL or SPA, especially for investment operations in start-ups by venture capital funds, private equity or business angels.
It is used in the initial phase of negotiations when it is not yet possible to definitively establish all the terms of an investment agreement (which includes an investment contract, shareholder agreement between future shareholders, company statute, etc.).
The purpose of the term sheet is therefore to help the parties to:
- fix the points of the negotiations on which an agreement has already been reached;
- plan the timing and methods of the investment transaction;
- identify the topics that need to be further investigated and negotiated.
Before signing a Term Sheet, it is advisable to sign a confidentiality agreement that protects all confidential information that shareholders will exchange with potential investors and their advisors.
What the investment letter of the intent template contains
Our Investment Term Sheet meets all legal requirements and includes some of the main clauses generally used for investment transactions. In particular, the main clauses included concern:
- English language: if one of the parties is foreign, it may be convenient to write the Term Sheet in English or to have both versions;
- amount of the investment (“round”): the total amount that investors will pay into the company to obtain the shareholdings;
- investor participation: the share of the share capital that will be attributed to new investors through the subscription of a capital increase;
- company value: the valuation of the company before the investment (pre-money value) and that after the investment (post-money value);
- lock-up: the possibility of prohibiting shareholders from transferring their shareholdings for a certain period of time;
- corporate governance: the choice of the number of members of the Board of Directors (Body) and the criteria for appointing the members of the Body and its offices (Chief Executive Officer and Chairman);
- special majorities in the shareholders ‘meeting and the Board of Directors: the percentage of votes, and any veto, with which the resolutions of the shareholders’ meeting or of the Board of Directors concerning relevant matters must be adopted;
- co-sale rights (tag along): clause protecting minority shareholders in the event of a sale to a third party buyer;
- drag along: clause protecting the majority shareholders in the event of a purchase offer for the entire share capital by a third party;
- divestment procedure (exit): the possibility that, after a few years, all shareholders will initiate a divestment procedure (e.g. listing / IPO, sale of the entire company, etc.);
- non-compete obligation: the provision that shareholders may not engage in competing activities with the company without the consent of the investors.
Furthermore, after the purchase, we will guide you step by step through all the subsequent formalities necessary for your term sheet to be regularly signed.
Information you need
All parts data are required to complete the document.
The document can be modified free of charge in all its parts without time limits. Don’t worry so if you don’t have all the information available during the interview, you can always enter it later.
- Letter of intent for investment (LOI)
- Memorandum of Understanding for Investment Agreement (MOU)
- Startup Term Sheet
Other useful templates and facsimiles
- Confidentiality Agreement: to share confidential data that must not be disclosed outside
- Letter of Intent: to define the current status of negotiation and regulate its continuation
- Bylaws and Deed of Incorporation Srl: to create the founding documents of a single-member limited liability company or with several partners and regulate its operation
- Non-Competition Agreement: to prevent a worker from going to a competitor at the end of his employment relationship
- Shareholders ‘Agreements: to regulate the vote in the shareholders’ meeting, the transfer of shareholdings, the management of corporate powers, etc.