Shareholder Agreement Term Sheet

Unlike a term sheet, the SHA is absolutely binding both for the investor(s) and for the company. This is the final agreement. Investors generally strive to protect their multiple rights (participation, registration, information and exit rights, etc.) in a shareholders` agreement. An accurate term sheet would help avoid sudden disruptions due to misunderstandings when signing the SHA. The shareholders` agreement is more or less an extension of a term sheet and therefore equal importance should be given to both parties. The roadmap does not bind anyone (with the exception of the cost, confidentiality and, if used, exclusivity clauses). It may sound strange, but the term sheet is more of a statement of intent than a contract. Normally, if a term sheet is agreed, the agreement is actually concluded, but this is not guaranteed. Things can get bad during due diligence and the investor can withdraw or ask for new terms. A term sheet is a simple, non-legally binding document that records the main trading conditions between a company and investors for the issuance of new common shares.

Another reason why you should have a term sheet designed is to ensure that there is no disagreement when it comes to making more formal agreements. Given the non-binding nature of a roadmap (ordinary shares), it is necessary for the parties to execute an investment agreement on ordinary shares in order to take full account of the binding conditions. A term sheet is a non-binding agreement that defines the basic conditions under which an investment is made.