Term Sheet

Expertises connexes

The term sheet is a non-binding agreement that reflects the intent and understanding of the parties to a financing process through an investor’s participation in the company’s equity. Because of its generally simple form, it allows sophisticated investors and professionals such as accountants and corporate lawyers to quickly grasp the terms and conditions that a negotiating party is willing to accept for an investment in the company and thus accelerate the negotiation process.

Thus, we will find the essential information of the offer such as:

– The total amount of the offer
– The price per share
– Type of shares (preferred, common)
– Ranking of the shares
– Valuation of the company
– Voting rights of the shares
– Confidentiality clauses
– Information clauses
– Non-competition clauses
– Company control clauses
– Exclusivity clauses
– Stock options
– Automatic conversion of preferred shares at the end of a period
– Mandatory offer clause

The term sheet may contain multiple clauses representing the will of the parties. For example, an investor could demand to be guaranteed a seat on the board of directors of the company.

If the term sheet is generally non-binding, certain clauses could nevertheless lead to the liability of the parties depending on the way it is drafted. For example, an exclusivity clause during the negotiations could bind the parties. Thus, a party who negotiates at the same time with another investor could, in this case, be held liable.

Although a useful tool for negotiations, the term sheet must be supplemented by a proper share purchase agreement and resolutions of the board of directors as well as a shareholders’ agreement, if applicable, as well as all corporate formalities required by law.

In order to protect your rights and avoid unpleasant surprises, you can rely on the team of Bernier Fournier at all stages of the negotiation process, including the drafting of the term sheet, and thus ensure the successful completion of your transactions.