Investment agreement term sheet Template for the UK
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What is an Investment agreement term sheet?
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.
Sample clauses: standard wording in a UK investment agreement term sheet
9. Legal Effect, Exclusivity and Confidentiality
9.1 Save for clauses 9.2 to 9.4 (and clause 13 (Governing Law)), this term sheet records the parties' current intentions only, is not intended to create legal relations and is subject to contract, satisfactory completion of due diligence and execution of the Investment Documents.
9.2 For the period of [45] days from the date of this term sheet (the "Exclusivity Period"), the Company shall not, and shall procure that its directors, shareholders and advisers shall not, solicit, negotiate, entertain or accept any offer of equity or quasi-equity investment from any person other than the Investor.
9.3 Each party shall keep confidential the existence and terms of this term sheet and all information disclosed in connection with the proposed investment, save for disclosure required by law, by the rules of any regulatory body or to that party's professional advisers on equivalent terms of confidence.
9.4 Each party shall bear its own costs, save that the Company shall pay the Investor's reasonable and properly incurred legal fees up to a cap of £[75,000] plus VAT on Completion.
10. Investor Consent Matters and Anti-Dilution
10.1 The Investment Documents will provide that the Company shall not, and shall procure that no Group Company shall, take any of the following actions without the prior written consent of the holders of [75]% of the A Ordinary Shares: altering the share capital or the articles of association; creating any new class of shares ranking in priority to the A Ordinary Shares; declaring any dividend; disposing of the whole or a material part of the business; or incurring borrowings in excess of £[500,000] in aggregate.
10.2 If the Company issues Equity Shares at a price per share lower than the Subscription Price (other than Permitted Issues), the Investor will be issued such number of additional ordinary shares of £[0.0001] each, credited as fully paid at nominal value, as places the Investor in the position it would have occupied on a [broad-based weighted average] basis.
10.3 Permitted Issues will include shares issued under an employee share option plan approved by the Investor Director, shares issued on conversion of the Investment and shares issued with the prior written consent of the Investor.
Illustrative extract showing typical drafting under the law of England and Wales. Documents generated with GenieAI are tailored to your rules, standards and context.
Frequently Asked Questions
When should you use an Investment agreement term sheet?
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.
What are the different types of Investment agreement term sheet?
- 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
Who should typically use an Investment agreement term sheet?
- 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
How do you write an Investment agreement term sheet?
- 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
What should be included in an Investment agreement term sheet?
- 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
What's the difference between an Investment agreement term sheet and an Investment 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
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About the Investment agreement term sheet
- 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
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