A Term Sheet For Sale of Business is a crucial preliminary document used in Indian business acquisitions and sales to establish the framework for a transaction before proceeding with detailed due diligence and definitive agreements. It captures the parties' initial understanding on key commercial terms such as purchase price, payment structure, assets or shares being transferred, and conditions precedent. While generally non-binding (except for specific provisions), it serves as a roadmap for the transaction and helps identify potential deal-breakers early in the process. The document must consider various Indian legal requirements including corporate law, competition law, tax implications, and sector-specific regulations. It's particularly important in the Indian context where business sales often involve complex regulatory considerations and multiple stakeholder approvals.
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1. Parties: Identification of the seller(s) and buyer(s), including complete legal names and addresses
2. Background: Brief description of the business being sold and the context of the proposed transaction
3. Definitions: Key terms used throughout the term sheet
4. Transaction Structure: Whether the transaction is a share sale, asset sale, or combination thereof
5. Purchase Price: Proposed consideration, including any adjustments, earn-outs, or deferred payments
6. Payment Terms: Timeline and method of payment, including any escrow arrangements
7. Key Assets/Shares: Description of the main assets or shares being transferred
8. Key Conditions Precedent: Essential conditions that must be met before the transaction can complete
9. Timeline: Expected dates for due diligence, definitive agreements, and completion
10. Exclusivity: Period during which the seller cannot negotiate with other potential buyers
11. Confidentiality: Obligations regarding transaction information and business secrets
12. Costs: Allocation of transaction costs between parties
13. Governing Law: Applicable law and jurisdiction for dispute resolution
14. Binding Effect: Clear statement of which provisions are binding and non-binding
1. Employee Matters: Include when employees are being transferred or when specific employment arrangements need to be addressed
2. Intellectual Property: Include when significant IP assets are involved in the transaction
3. Real Estate: Include when property transfers or lease assignments are part of the deal
4. Regulatory Approvals: Include when specific regulatory clearances are required
5. Environmental Matters: Include when the business has significant environmental aspects or risks
6. Tax Structure: Include when specific tax planning arrangements need to be outlined
7. Transition Services: Include when post-completion services are required from the seller
8. Non-Compete: Include when restrictions on seller's future activities are required
9. Debt/Working Capital: Include when specific arrangements for handling existing debt or working capital are needed
1. Schedule 1 - Key Assets: Detailed list of main assets included in the sale
2. Schedule 2 - Excluded Assets: List of assets specifically excluded from the transaction
3. Schedule 3 - Key Contracts: List of material contracts to be transferred
4. Schedule 4 - Intellectual Property: Details of IP rights included in the sale
5. Schedule 5 - Employee Information: Key details about employees being transferred
6. Schedule 6 - Purchase Price Adjustments: Detailed mechanics for any price adjustment mechanisms
7. Schedule 7 - Required Consents: List of third-party consents needed for the transaction
8. Appendix A - Proposed Timeline: Detailed transaction timeline with key milestones
9. Appendix B - Form of Confidentiality Agreement: Draft of the separate confidentiality agreement if required
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