Drafting Term Sheets for Investment & Business Deals

📄 Drafting Term Sheets

Structuring Deals with Clarity & Confidence

A Term Sheet is a foundational document that outlines the key terms and conditions of a proposed business agreement between two or more parties. Whether it's an investment deal, joint venture, merger, acquisition, or strategic partnership, a well-drafted term sheet ensures that all stakeholders are aligned before the final legal agreements are executed.

A Term Sheet is a non-binding document that sets out the basic framework of a proposed transaction. It serves as a blueprint for drafting definitive agreements and helps parties negotiate with clarity and efficiency.

Though typically non-binding, a term sheet reflects the mutual understanding between parties and helps ensure that everyone is aligned on the commercial, financial, and legal aspects before committing to a formal contract.

🧾 Purpose of a Term Sheet

A Term Sheet serves as a strategic tool that outlines the key commercial and legal terms of a proposed transaction before binding agreements are executed. It acts as a blueprint that sets the tone for negotiations and ensures that all parties are aligned on major deal points.

✅ Core Purposes Include:

1. Clarifying Intentions

👉 Establishes a mutual understanding of the deal structure,

expectations, and responsibilities.

2. Guiding Legal Drafting

👉Forms the foundation for drafting detailed contracts such as

shareholder agreements, investment agreements, or JV agreements.

3. Saving Time & Legal Costs

👉 Helps identify and resolve potential deal-breakers early, reducing

unnecessary negotiation or redrafting later.

4. Minimizing Disputes

👉 Serves as a reference point in case of misunderstandings or

disagreements during the formalization process.

5. Facilitating Due Diligence

👉 Provides investors and stakeholders with a structured summary to

proceed with legal, financial, and commercial due diligence.

6. Enabling Faster Approvals

👉 When presented clearly, it can accelerate internal reviews and

decision-making by boards, investors, and legal teams.

🎯 In essence, a Term Sheet ensures that all stakeholders are on the same page from the outset, setting the stage for a smoother and more transparent transaction process.

⚙️ Common Use Cases:

👉 Startup funding rounds (Angel, Seed, Series A/B/C)

👉 Mergers and Acquisitions (M&A)

👉 Joint Ventures (JVs)

👉 Business collaborations or strategic alliances

👉 Sale or purchase of shares/assets

🧑‍💼 Key Features:

👉 Investment amount & valuation

👉 Capital structure and equity allocation

👉 Roles, responsibilities, and governance rights

👉 Exit options, lock-in periods, and liquidation preferences

👉 Dispute resolution and jurisdiction

A well-drafted term sheet is crucial for a smooth transaction, avoiding future disputes, and saving time and legal costs during the drafting of final agreements.

🔍 What Does a Term Sheet Typically Include?

✅ Purpose and scope of the transaction

📊 Investment amount and valuation

🏢 Shareholding structure (pre and post-deal)

🗳️ Rights and obligations of parties

🔄 Exit options and transfer restrictions

💼 Board representation and management roles

🔒 Confidentiality & non-compete provisions

🕒 Timelines and conditions precedent

⚖️ Dispute resolution mechanism

⚠️ Why a Well-Drafted Term Sheet Matters

A Term Sheet is often the first formal document exchanged in a transaction—but its importance goes far beyond just outlining the basics. A well-drafted Term Sheet plays a critical role in shaping the success, clarity, and speed of the deal.

✅ Here’s Why It Matters:

1. 🧩 Provides Strategic Clarity

It sets out the core commercial terms, expectations, and roles—ensuring all parties start from a shared understanding.

2. 🔍 Prevents Costly Misunderstandings

By clarifying key elements like valuation, shareholding, exit rights, and decision-making authority early, it avoids disputes during the drafting of final agreements.

3. ⏱ Speeds Up Negotiations

A clear Term Sheet simplifies the process of negotiating definitive documents, saving time, legal effort, and cost.

4. ⚖️ Reduces Legal & Commercial Risk

Outlining rights, obligations, and deal structures upfront helps identify deal-breakers early and reduces surprises down the line.

5. 📈 Strengthens Investor & Partner Confidence

A well-structured Term Sheet reflects professionalism and preparedness, which boosts confidence among investors, VCs, and business partners.

6. 📃 Facilitates Due Diligence & Approvals

It provides a concise summary that is easy to review internally or share with legal, financial, and compliance teams.

🧑‍💼 How TAXAJ Assists You in Term Sheet Drafting

At TAXAJ, we go beyond basic documentation—we help you strategically structure and negotiate your Term Sheet to protect your interests, align stakeholder expectations, and pave the way for a successful transaction.

Whether you’re a startup founder, investor, corporate, or business partner, our legal and financial experts ensure that your Term Sheet is not just clear—but commercially and legally sound.

🛠️ Our End-to-End Support Includes:

📋 1. Understanding Your Transaction

👉 We first assess the nature and objectives of your deal-

investment, joint venture, M&A, strategic alliance, or otherwise.

👉 Clarify your short-term goals and long-term interests to draft

a Term Sheet aligned with your vision.

✍️ 2. Drafting Tailor-Made Term Sheets

👉 Customised drafting based on deal structure, industry standards,

and legal enforceability.

👉 Ensure that all critical clauses—valuation, equity, rights,

governance, exit, and confidentiality—are clearly defined and

negotiated.

🔍 3. Legal Review of Existing Term Sheets

👉 Review investor/offered Term Sheets to identify red flags,

unfair clauses, or missing protections.

👉 Provide strategic inputs to help you renegotiate on stronger terms.

⚖️ 4. Negotiation & Advisory Support

👉 We assist you in deal negotiations, helping bridge the gap

between commercial intent and legal documentation.

👉 Suggest favorable alternatives to balance rights and

responsibilities fairly.

📁 5. Seamless Transition to Final Agreements

👉 Once the Term Sheet is signed, we help you draft or review final

binding agreements—ensuring full alignment

with the Term Sheet’s terms.

💼 At TAXAJ, we ensure that your Term Sheet is not just a formality—but a solid, strategic foundation for your next big move.

🎯 Stay RBI-Compliant with Confidence.

Whether it’s your first FDI or a complex restructuring, TAXAJ ensures timely, accurate, and hassle-free drafting of all the necessary forms.

For any type of filing with RBI

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