We recommend that the company and the investor agree the principle terms of the deal using either what are often called “Term Sheets” or a “Heads of Agreement”. MBM Commercial has prepared template Seed Investment Heads of Agreement which can be downloaded for free through our website. The Seed Investment Heads of Agreement sets out the main parameters of the deal, including what percentage shareholding the investor is to receive for his investment. The Heads of Agreement can help in setting out the framework of the deal before the parties get engaged in more formal investment documentation where they start to incur expense.
The majority of the provisions of the Heads of Agreement are not legally binding, but do carry a certain moral weight once entered into. Some clauses, however, will be legally binding so it is important to bear this in mind. MBM Commercial can advise you should you require any guidance on the Heads of Agreement.
Here is a link to a blog post published by MBM Commercial discussing Heads of Agreement/Term Sheets which sheds some more light on the subject
Read our briefing note on how to run an early stage seed investmentDownload
"I felt that all the documents were very helpful. This made for easier understanding with the glossary that you attached allowing for easy cross reference to terms and wording.……