Contract Drafting & Law Course Preview
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<p class="banner-heading-text-two-line"><span>Drafting term sheet</span><br><span class="banner-sub-heading">Term Sheet </span></p>
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<p><span class="padded-dropcap">T</span>ransfer restrictions are an essential part of the term sheet. Clauses such as the Right of First Offer (ROFO) and Right of First Refusal (ROFR) regulate how shareholders can transfer their shares. ROFO gives existing shareholders the first opportunity to buy shares before they are offered to a third party, while ROFR allows shareholders to match the terms of a third-party offer to purchase shares.</p>
<p>Exit rights are also heavily negotiated in the term sheet. These include the methods through which investors can exit their investment, such as IPOs, trade sales, drag-along rights, or buy-back of securities. Investors may also seek liquidation preference rights, ensuring they receive their investment proceeds before other shareholders in the event of the company’s liquidation or sale.</p>
<p>Another crucial provision is the promoter lock-in clause, which prevents promoters from leaving the company or diluting their stake for a specified period. This ensures stability within the company, as investors rely heavily on the promoter’s involvement. The lock-in period and the percentage of shares locked are usually negotiated at the term sheet stage.</p>
<p>Reserved matters, or affirmative voting rights, are decisions that require the investor’s consent before they can be implemented by the company. These may include major financial decisions, issuance of new shares, or amendments to the company’s charter documents. The list of reserved matters is carefully negotiated to strike a balance between protecting the investor’s interests and allowing the company to operate efficiently.</p>
<p>The term sheet also includes important boilerplate clauses such as confidentiality, exclusivity, and dispute resolution. Confidentiality ensures that sensitive information shared during negotiations remains protected. Exclusivity clauses grant one party the exclusive right to negotiate the transaction for a specified period, preventing the other party from seeking alternative deals.</p>
<p>Dispute resolution clauses outline the mechanism for resolving conflicts arising from the term sheet or the final agreement. This includes deciding on the jurisdiction, the seat of arbitration, and the venue. For cross-border transactions, foreign investors typically prefer neutral arbitration venues such as Singapore or London, whereas Indian parties may push for domestic arbitration to reduce costs.</p>
<p><a href="https://ebclearning.com/courses/course-v1:EBC-Learning+law-contract+2025/courseware/c55b32d6af434f95b9c015d9241ca81e/983007197cd7450694789a29d2f223c0/5?activate_block_id=block-v1%3AEBC-Learning%2Blaw-contract%2B2025%2Btype%40vertical%2Bblock%40ca12623c59ab44d4b5470c5c0b7b3e53">More details can be found at:</a></p>
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