The Term Sheet For Acquisition of Shares is a crucial preliminary document used in Indian corporate transactions to establish the framework for share purchase negotiations. It is typically employed during the initial stages of a potential acquisition when parties have reached a preliminary understanding but before conducting detailed due diligence or drafting definitive agreements. The document addresses key commercial terms, valuation principles, deal structure, and preliminary conditions while considering Indian regulatory requirements such as Companies Act provisions, SEBI regulations, FDI norms, and competition law thresholds. While most provisions are non-binding, certain sections like confidentiality and exclusivity carry legal force. The document serves as a roadmap for legal counsel to draft detailed transaction documents and helps avoid misunderstandings during later stages of negotiation.
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1. Parties: Details of the buyer(s), seller(s), and the target company
2. Background: Brief context of the proposed transaction and current ownership structure
3. Definitions: Key terms used throughout the term sheet
4. Transaction Structure: Overview of the proposed share acquisition structure and mechanics
5. Purchase Price: Proposed consideration, payment terms, and any price adjustment mechanisms
6. Conditions Precedent: Key conditions that must be satisfied before closing
7. Timeline: Expected schedule for due diligence, documentation, and closing
8. Exclusivity: Period during which sellers cannot negotiate with other potential buyers
9. Confidentiality: Obligations regarding transaction information and company data
10. Costs: Allocation of transaction expenses between parties
11. Governing Law: Applicable law and jurisdiction for dispute resolution
12. Binding Effect: Specifying which provisions are legally binding and non-binding
1. Management and Employment: Include when key management retention or employment terms are crucial to the deal
2. Post-Closing Covenants: Add when specific post-closing obligations need to be outlined
3. Earn-out Provisions: Include when part of purchase price is contingent on future performance
4. Break Fee: Add when parties want to specify compensation for transaction termination
5. Regulatory Approvals: Include for regulated industries or transactions requiring specific approvals
6. Foreign Investment Provisions: Add when foreign investors are involved requiring FEMA compliance
7. Shareholder Rights: Include when minority shareholders' rights need to be addressed
8. Anti-dilution Protection: Add when protecting against future share dilution is important
9. Tag-Along/Drag-Along Rights: Include when future exit rights need to be addressed
1. Capital Structure: Current and post-closing shareholding pattern
2. Purchase Price Calculation: Detailed breakdown of consideration and adjustment mechanisms
3. Key Assets: List of material assets included in the transaction
4. Material Contracts: Summary of key contracts requiring attention/consent
5. Conditions Precedent Checklist: Detailed list of conditions to be satisfied
6. Transaction Timeline: Detailed schedule of key dates and milestones
7. Due Diligence Requirements: Scope and requirements for due diligence process
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