Term sheet

Why do I need it?

If you are looking for an investment, it is essential to - in an early stage - set out the proper terms under which you'll be negotiating further. The final investment agreement is usually a long, complicated and comprehensive document. In addition, many other agreements are often part of the closing process, such as a shareholders' agreementA term sheet helps to align all parties at least on the key terms before you start the process of drawing up the final documentation.

Advantages of a term sheet:

• Both parties get a clear picture of the key conditions before negotiations proceed.
• With a term sheet you avoid lengthy negotiations on the entire agreement in the early stages.
• You prevent any (unwanted) binding agreements in the so-called "pre-contractual phase".

A term sheet is a foundation for a solid investment agreement in a later stage of the negotiations and is the first step towards a successful partnership.

Alternative names

A ‘term sheet’ is not the correct "legal" name, but is its more popular name. Other names under which a term sheet is also known:

• Letter of Intent (or: LOI).
• Memorandum of Understanding (or: MOU).
• Heads of Agreement (or: HOA).
• Agreement of intent.
• Agreement on outlines.

Important tips

English content

The term sheet itself is in English. That way, you can easily do business with different national and international investors. Even if the first investor is Dutch, it is advisable to use an English term sheet. Possibly other investors will join in the future. Those other investors may not be Dutch. By taking this into account now, you avoid ambiguity later.