Term Sheet Venture Capital Template for Malaysia

A Venture Capital Term Sheet is a crucial preliminary document that outlines the proposed terms and conditions for a venture capital investment in Malaysia. This document, while typically non-binding (except for certain provisions like confidentiality and exclusivity), serves as the foundation for the final investment agreements. It complies with Malaysian corporate law and securities regulations, particularly the Guidelines for the Registration of Venture Capital and Private Equity Corporations issued by the Securities Commission Malaysia. The document details key investment terms including valuation, share class rights, governance provisions, and investor protections, while considering local regulatory requirements and market practices.

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What is a Term Sheet Venture Capital?

The Term Sheet Venture Capital document is a critical instrument in the Malaysian venture capital ecosystem, typically used during the preliminary stages of investment negotiations. It serves as a blueprint for the eventual detailed investment agreements, outlining the fundamental terms and conditions under which a venture capital firm proposes to invest in a company. This document must comply with Malaysian regulatory requirements, including the Companies Act 2016 and Securities Commission guidelines. While mostly non-binding, it provides essential structure to negotiations and covers key aspects such as investment amount, valuation, share rights, governance, and exit provisions. The term sheet helps all parties understand the basic deal terms before incurring the expense of full legal documentation and due diligence, making it an essential tool in the venture capital investment process.

What sections should be included in a Term Sheet Venture Capital?

1. Parties: Identification of the company, lead investor(s), and other participating investors

2. Background: Brief description of the company, purpose of investment, and context of the transaction

3. Definitions: Key terms used throughout the term sheet

4. Investment Terms: Amount of investment, valuation, type of securities being issued

5. Share Capital Structure: Pre and post-money capitalization, share classes, and rights

6. Investor Rights: Voting rights, board representation, protective provisions

7. Transfer Restrictions: Lock-up period, right of first refusal, co-sale rights

8. Anti-Dilution Protection: Mechanisms to protect investors from future down rounds

9. Exit Rights: Drag-along and tag-along rights, IPO rights, put options

10. Information Rights: Financial reporting requirements and inspection rights

11. Confidentiality: Non-disclosure obligations regarding the term sheet and negotiations

12. Exclusivity: Period during which the company cannot seek other investments

13. Closing Conditions: Prerequisites for completing the investment

14. Governing Law: Applicable law and jurisdiction for dispute resolution

What sections are optional to include in a Term Sheet Venture Capital?

1. Founders' Matters: Include when specific commitments from founders are required - vesting schedules, non-compete, employment terms

2. Corporate Governance: Include for detailed management structure requirements beyond basic board rights

3. Technology Rights: Include for technology-focused companies requiring specific IP protection provisions

4. Strategic Rights: Include when strategic investors require specific commercial rights or partnerships

5. Multiple Closing Provisions: Include when investment will be made in tranches or multiple closings

6. Conversion Rights: Include for preferred shares with specific conversion mechanisms

7. Pre-emptive Rights: Include when investors require rights to participate in future rounds

8. Employee Share Option Pool: Include when establishing or modifying ESOP as part of the investment

What schedules should be included in a Term Sheet Venture Capital?

1. Cap Table: Detailed breakdown of current and post-investment shareholding structure

2. Key Terms Definition: Detailed definitions of technical terms and financial calculations

3. Milestones Schedule: If applicable, specific business or performance milestones tied to investment

4. Use of Proceeds: Detailed breakdown of how investment funds will be utilized

5. Key Personnel: List of key management and technical personnel with roles

6. Material Contracts: List of significant contracts affecting the investment

7. Intellectual Property: Schedule of company's key intellectual property assets

8. Investment Timeline: Expected timeline for due diligence, documentation, and closing

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Malaysia

Publisher

Genie AI

Cost

Free to use

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