Term Sheet (UK) by Seedsummit
OpenLegalLibrary
This document is a Summary of Terms for the sale of Series Seed Shares, outlining the key commercial and legal provisions for an early-stage equity funding round. It is designed for use with institutional or venture capital investors, covering aspects like investment structure, share types, investor rights, and founder obligations. The summary helps parties understand the proposed terms before drafting definitive investment documents, with certain clauses being legally binding immediately upon acknowledgment and agreement by the parties involved in the transaction, such as expenses, exclusivity, and confidentiality provisions, which are governed by the laws of England and Wales. The document also includes details on liquidation preference, anti-dilution, vesting, and board composition, which are crucial for defining the relationship between the company, its founders, and investors during a funding round. It also outlines the conditions to close, estimated closing date, and the type of security being offered, which are newly issued series seed convertible preferred shares. The document also details the capitalisation of the company following the completion of the financing, which is set out in Appendix A. It also includes provisions for pre-emption rights on new share issues, right of first refusal on share transfers, co-sale rights, tag-along, and drag-along, which are important for protecting the interests of the investors and ensuring an orderly exit strategy. The document also specifies restrictive covenants and founders undertakings, which are designed to protect the company's intellectual property and ensure the founders' commitment to the company. The document also outlines the board of directors' composition and the information and management rights of the investors, which are important for corporate governance and investor oversight. The document also specifies that definitive investment documents shall be drafted by counsel to the Lead Investor based on the British Venture Capital Association (BVCA) form documents, ensuring that the legal documentation is robust and in line with industry standards. The document also includes options for expenses, exclusivity, and confidentiality, which are crucial for managing the transaction process and protecting sensitive information. The document also clarifies that it is not intended to be legally binding, with the exception of certain paragraphs, which are binding upon the parties and shall be governed and construed in accordance with the laws of England and Wales. This ensures that the parties are clear about their obligations and the legal framework governing the transaction. Overall, this document provides a comprehensive overview of the terms for a Series Seed Share funding round, making it a valuable tool for both companies seeking investment and investors looking to fund early-stage ventures. It also includes a capitalisation table in Appendix A, which provides a clear overview of the company's ownership structure after the financing. The document also includes a signature page for the company, lead investor, and other investors, ensuring that all parties acknowledge and agree to the terms outlined in the document. The document also includes various data fields and options, allowing for customization and flexibility to suit the specific needs of the transaction. This makes the document adaptable to different scenarios and ensures that it can be tailored to the unique requirements of each funding round. The document also includes helper text and explanations for various provisions, which are useful for understanding the implications of each term and making informed decisions. This enhances the clarity and usability of the document, making it accessible to a wider audience. The document also references BVCA model documents, which are widely recognized and respected in the venture capital industry, further enhancing the credibility and reliability of the terms outlined in the document. This ensures that the document is aligned with best practices and industry standards, providing a solid foundation for the investment. The document also includes provisions for anti-dilution protection, which is important for protecting investors from the dilution of their ownership in the event of a down round. This ensures that investors' interests are safeguarded and that they receive fair treatment in subsequent funding rounds. The document also outlines the conversion rights of the Seed Shares, which are important for defining the terms under which the shares can be converted into ordinary shares. This provides flexibility for investors and allows them to convert their shares at an initial conversion rate of 1, subject to proportional adjustment for share splits, dividends, or recapitalisations. The document also specifies the conditions under which the Seed Shares shall automatically convert into Ordinary Shares, such as upon a Seed Majority consenting to such conversion or upon the closing of a firmly underwritten public offering of shares in the capital of the Company, which results in gross proceeds to the Company of at least a specified amount. This ensures that the conversion process is clear and transparent, providing certainty for both the company and the investors. The document also includes options for important decisions, which require the consent of the holders of a majority of the Seed Shares or the director appointed by the Seed Majority. This ensures that investors have a say in key strategic decisions and that their interests are protected. The document also includes various options for the board of directors' composition, allowing for flexibility in structuring the board to suit the specific needs of the company and its investors. This ensures that the board is well-represented and that all stakeholders have a voice in the company's governance. The document also includes options for information and management rights, which are important for ensuring that investors have access to relevant information and that their management rights are protected. This promotes transparency and accountability, fostering a healthy relationship between the company and its investors. The document also includes options for expenses, allowing for flexibility in determining who pays for the legal and other fees and expenses in the transaction. This ensures that the parties can negotiate and agree on a fair allocation of costs. The document also includes an exclusivity provision, which is important for protecting the lead investor from being