Investment agreement term sheet Template for England and Wales

An investment agreement term sheet outlines the key points of a potential investment deal between investors and a company seeking funding. It serves as a roadmap for negotiating the final investment agreement, covering essential items like valuation, share rights, and investor protections under English law.

While not legally binding itself (except for confidentiality and exclusivity provisions), this document helps both parties align their expectations early in the process. It typically includes the investment amount, ownership percentages, board composition, and any special rights like anti-dilution protection or veto powers - making it easier to spot potential deal-breakers before spending time and money on detailed legal documentation.

Use an investment agreement term sheet when you're ready to seriously negotiate investment terms but want to avoid costly legal fees drafting full documentation too early. It's particularly valuable when dealing with professional investors like venture capital firms or angel investors who expect a structured approach to investment discussions.

The term sheet becomes essential once basic discussions have established mutual interest but before conducting detailed due diligence. This timing allows both parties to agree on key commercial terms and deal-breakers upfront, saving time and legal costs. It's especially useful for funding rounds above £250,000, where multiple investors or complex rights need coordination.

• Startup Investment Term Sheet: Focused on early-stage companies, covering founder vesting and growth-oriented provisions
• Convertible Equity Term Sheet: Used for investments that convert to equity at a future funding round, with discount and valuation cap terms
• Mezzanine Loan Term Sheet: Combines debt and equity elements for established companies seeking growth capital
• Limited Partnership Term Sheet: Structured for investment funds and joint ventures, focusing on partnership governance
• Mezzanine Debt Term Sheet: Specialized for subordinated debt with equity-like features in larger financing deals

• Investors (VCs, Angels, Funds): Usually initiate and draft the investment agreement term sheet, outlining their key requirements and investment terms
• Company Founders/Directors: Review, negotiate, and approve terms on behalf of the target company, often with support from their board
• Corporate Lawyers: Advise both sides on legal implications, draft or review terms, and ensure compliance with UK company law
• Investment Bankers: Often facilitate larger deals, helping structure terms and coordinate between parties
• Company Secretaries: Handle administrative aspects and ensure proper corporate governance procedures are followed

• Company Details: Gather accurate company information, including registration number, share capital structure, and existing shareholders
• Investment Terms: Define investment amount, valuation, share class, and any special rights or preferences
• Due Diligence: Prepare key financial statements, business plan, and current cap table
• Governance Items: Outline board composition, voting rights, and any veto rights
• Exit Provisions: Specify drag-along rights, tag-along rights, and anti-dilution protections
• Timeline Planning: Set clear milestones for due diligence, documentation, and completion

• Investment Details: Specify investment amount, valuation, share class, price per share, and completion timeline
• Investor Rights: Detail voting rights, board representation, information rights, and pre-emption rights
• Share Terms: Define dividend rights, liquidation preferences, and conversion rights
• Protection Provisions: Include anti-dilution rights, drag-along and tag-along provisions
• Confidentiality: Clear terms on information sharing and non-disclosure obligations
• Binding Terms: Specify which provisions are legally binding (typically confidentiality and exclusivity)
• Governing Law: Explicit statement that English law governs the agreement

The key difference between an investment agreement term sheet and an Investment Agreement lies in their legal status and level of detail. While both documents relate to investment transactions, they serve distinct purposes in the investment process.

• Legal Binding: Term sheets are largely non-binding (except for confidentiality and exclusivity), while investment agreements are fully binding legal contracts
• Detail Level: Term sheets provide a high-level summary of key commercial terms, while investment agreements contain comprehensive legal provisions and warranties
• Timing: Term sheets come first as negotiation tools, while investment agreements represent the final, detailed agreement
• Cost and Complexity: Term sheets are simpler and less expensive to draft, making them ideal for initial negotiations before committing to full legal documentation