Term Sheet (India)
TERM SHEET
Governed by the Indian Contract Act 1872 and applicable SEBI Regulations
NON-BINDING (except Sections 5 and 6 which are binding)
This Term Sheet is issued on [Term Sheet Date] at [Agreement City] and sets out the principal proposed terms for an investment by [Investor Name] in [Company Name].
Company: [Company Name] (CIN: [Company CIN]), registered at [Company Address]. Founders/Promoters: [Founder Names].
Investor: [Investor Name], [Investor Address].
1. TRANSACTION OVERVIEW
1.1 Round: [Funding Round]
1.2 Investment Amount: [Investment Amount]
1.3 Pre-Money Valuation: [Pre Money]
1.4 Post-Money Valuation: [Pre-Money + Investment Amount]
1.5 Investor's Equity Stake (fully diluted, post-money): [Equity Stake]
1.6 Investment Instrument: [Investment Instrument]. The instrument shall be issued in compliance with the Companies Act 2013 and, where applicable, the FDI Policy and FEMA regulations.
1.7 Target Closing Date: [Closing Deadline]
2. KEY INVESTOR RIGHTS (NON-BINDING)
2.1 Anti-Dilution: Broad-based weighted average anti-dilution protection in the event of a down-round financing.
2.2 Liquidation Preference: 1x non-participating liquidation preference on the investment amount, senior to equity shareholders.
2.3 Board Representation: Right to appoint one (1) nominee Director to the Company's Board of Directors.
2.4 Information Rights: Quarterly management accounts within 30 days of each quarter-end; annual audited accounts; annual business plan; right to inspect books on reasonable notice.
2.5 Pre-emptive Rights: Pro-rata right to participate in future funding rounds to maintain ownership percentage.
2.6 Tag-Along Rights: Right to participate in any sale of the Founders' shares on the same terms.
2.7 Drag-Along Rights: Majority shareholders (including the Investor) may drag minority shareholders into a sale of the Company.
2.8 ESOP Pool: A minimum of 10% (fully diluted) ESOP pool shall be created before closing, if not already in place.
3. CONDITIONS PRECEDENT (NON-BINDING)
3.1 Completion of satisfactory legal, financial, and technical due diligence by the Investor.
3.2 Execution of definitive transaction documents including a Subscription Agreement and Shareholders' Agreement in form and substance satisfactory to the Investor.
3.3 No material adverse change in the Company's business, financial condition, or prospects.
3.4 All required regulatory approvals and corporate authorisations obtained, including RBI and FEMA approvals for foreign investment, if applicable.
3.5 Founder lock-up: Founders shall agree to a vesting schedule and lock-up on their shares as agreed in the definitive documents.
4. NON-BINDING NATURE
4.1 Except for Sections 5 (Exclusivity) and 6 (Confidentiality), this Term Sheet does not constitute a legally binding commitment by either Party to proceed with the proposed transaction. The binding commitment will arise only upon execution of definitive transaction documents.
4.2 This Term Sheet does not represent a binding offer, acceptance, or agreement under the Indian Contract Act 1872 in respect of the main transaction terms.
5. EXCLUSIVITY — BINDING
5.1 In consideration of the Investor's commitment of time and resources to due diligence, the Company and the Founders agree that for a period of [Exclusivity Period] from the date of this Term Sheet (the 'Exclusivity Period'), neither the Company nor the Founders shall directly or indirectly solicit, encourage, initiate, or participate in discussions or negotiations with any third party regarding any alternative investment, acquisition, or financing transaction.
5.2 This exclusivity obligation is binding and enforceable under the Indian Contract Act 1872. Breach of this obligation shall entitle the Investor to damages including reimbursement of due diligence costs incurred.
6. CONFIDENTIALITY — BINDING
6.1 Each Party agrees to keep the existence and terms of this Term Sheet strictly confidential and shall not disclose such information to any third party without the other Party's prior written consent, except to legal, financial, and tax advisors on a need-to-know basis.
6.2 This confidentiality obligation is binding under the Indian Contract Act 1872 and shall survive termination of this Term Sheet for a period of 24 months.
6.3 Governing Law: This Term Sheet (to the extent binding) is governed by the laws of India. The courts at [Agreement City] shall have jurisdiction.
Investor (Authorised Signatory)
________________
Signature
Company (Authorised Signatory)
________________
Signature
Founder / Promoter
________________
Signature
What Is a Term Sheet (India)?
A Term Sheet in India defines what each party must do under the deal and the consequences of failing to perform.
Governed by the Indian Contract Act 1872 and (for investment transactions) SEBI Regulations and FEMA/RBI guidelines, a term sheet establishes the key commercial terms — pre-money valuation, equity stake, investment amount, anti-dilution rights, liquidation preference, board rights, voting rights, and exit mechanisms — before the parties commit resources to the full due diligence and documentation process.
In India's vibrant startup and investment ecosystem, term sheets follow broadly standardised formats influenced by the IVCA Model Documents and international VC practice. For listed company transactions, SEBI's disclosure obligations and takeover regulations impose additional requirements.
A well-structured term sheet aligns the parties on essential commercial terms, reduces the risk of late-stage deal failure, and provides the framework for drafting detailed transaction agreements. While mostly non-binding, exclusivity and confidentiality provisions are typically binding.
The legal framework governing the Term Sheet (India) in India draws on several key statutes and regulatory bodies. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Parties executing a Term Sheet (India) in India should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Indian Contract Act, 1872 sets the foundational requirements.
When Do You Need a Term Sheet (India)?
You need an India Term Sheet whenever you are negotiating a significant investment, acquisition, or strategic transaction. This includes seed, angel, and Series A–D equity funding rounds for startups; venture capital and private equity investments; strategic acquisitions of private companies; convertible note and SAFE investments; and joint venture formations.
You need this term sheet before incurring significant due diligence costs. The term sheet aligns both parties on the essential commercial terms — particularly valuation, equity stake, and key investor rights — before either party commits time and money to full legal and financial due diligence.
You need this term sheet to establish exclusivity. The binding exclusivity provision prevents the company from shopping the deal to competing investors for a defined period, giving the lead investor confidence that their due diligence investment will not be undermined.
You need this term sheet for FEMA compliance when a foreign investor is involved. The investment structure, instrument type (CCPS, CCDs), pricing, and reporting obligations under FEMA and the FDI Policy must be considered at the term sheet stage to confirm the proposed deal structure is compliant.
Parties in India should prepare a Term Sheet (India) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Term Sheet (India)
A thorough India Term Sheet should contain the following key elements.
Parties: Company name, CIN, registered address, founders/promoters, and investing party details.
Transaction Overview: Type of transaction (equity investment, CCPS, CCD, acquisition), funding round designation, and proposed closing date.
Valuation and Investment: Pre-money valuation, investment amount, post-money valuation, and resulting equity stake (fully diluted).
Capitalisation Table: Pre-investment and post-investment cap table showing all shareholders and their percentage ownership on a fully diluted basis.
Investment Instrument: Type of security (ordinary shares, CCPS, CCDs), conversion mechanics, and pricing consistent with FEMA/FDI Policy requirements.
Anti-Dilution: Weighted average anti-dilution (broad-based) or other agreed mechanism.
Liquidation Preference: Preference amount (1x non-participating or participating), priority among investor classes.
Board Rights: Investor's right to appoint nominee director(s), board composition, and quorum requirements.
Information Rights: Financial reporting obligations, inspection rights, and management update obligations.
Pre-emptive and Co-sale Rights: Pro-rata participation in future rounds, tag-along and drag-along rights.
Exclusivity: Binding no-shop period and duration.
Confidentiality: Binding mutual confidentiality obligations.
Conditions Precedent: Conditions to closing (due diligence completion, regulatory approvals, founder lock-up).
Governing Law: Indian law and SEBI/FEMA compliance.
Additional compliance elements for a Term Sheet (India) used in India include: Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). The Industrial Disputes Act 1947 and state labour commissioners govern employment disputes. The Information Technology Act 2000 and IT (Reasonable Security Practices) Rules 2011 protect personal data. The Income Tax Act 1961 and Goods and Services Tax Act 2017 govern tax obligations through the Central Board of Direct Taxes (CBDT) and GST Council. Forms-legal.com provides this template as a starting point for India-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Term Sheet (India) (India) [Legal document template]. Forms Legal. https://forms-legal.com/india/business/contracts/term-sheet-india
"Term Sheet (India) (India)." Forms Legal, 2026, https://forms-legal.com/india/business/contracts/term-sheet-india.
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title = {Term Sheet (India) (India)},
year = {2026},
howpublished = {\url{https://forms-legal.com/india/business/contracts/term-sheet-india}},
note = {Free legal document template. Based on Indian Contract Act, 1872}
}Also available for these jurisdictions:
Frequently Asked Questions
The legal status of a term sheet in India is a nuanced question that turns on the specific language used and the intentions of the parties as evidenced by the document and surrounding circumstances. The Indian Contract Act 1872 governs the enforceability of agreements, and the key question is whether the term sheet meets the requirements for a binding contract: offer, acceptance, consideration, free consent, and lawful object. In Indian deal practice, term sheets are typically drafted to be non-binding in most respects, with the parties clearly intending to negotiate and execute definitive transaction documents (shareholder agreement, subscription agreement, share purchase agreement) based on the term sheet. Courts in India have generally respected parties' expressed intentions — where a term sheet expressly states that it is 'non-binding' and 'subject to execution of definitive agreements,' Indian courts have declined to treat the term sheet as a binding contract in itself. However, certain provisions of a term sheet are commonly intended to be binding even though the overall document is non-binding.
Investor rights in Indian startup term sheets have been significantly standardised by the Indian Venture Capital Association (IVCA) Model Documents, the Bombay High Court's Juristech principles, and general practice developed by the major Indian startup-focused law firms. The following are the key investor rights provisions typically seen in Indian startup term sheets. Anti-Dilution Protection: Protects investors from dilution in future funding rounds at a lower valuation (a 'down round'). The two main mechanisms are full ratchet anti-dilution (the investor's conversion price is adjusted to the new lower price — heavily investor-friendly and rare in Indian practice) and weighted average anti-dilution (the conversion price is adjusted by a formula that takes into account the size of the dilutive round — the standard in Indian VC/PE deals). The agreement should specify whether the weighted average is broad-based (includes all shares on an as-converted, fully-diluted basis) or narrow-based (includes only shares of the same class as the investment). Liquidation Preference: Determines the order and amounts in which investors receive proceeds upon a liquidation event (merger, acquisition, winding up). Non-participating liquidation preference (investor receives their investment back at a specified multiple, e.g., 1x, then common shareholders receive the remainder) is investor-friendly.
Foreign investment in Indian companies is regulated by the Foreign Exchange Management Act 1999 (FEMA), administered by the Reserve Bank of India (RBI), and the Foreign Direct Investment (FDI) Policy issued by the Department for Promotion of Industry and Internal Trade (DPIIT). When a foreign investor (including a foreign VC fund, PE fund, or strategic investor) proposes to invest in an Indian company, the term sheet must be structured in compliance with FEMA and the FDI Policy. FDI Policy Routes: Foreign investment in most sectors proceeds on the automatic route (no prior government approval required, subject to sectoral caps and conditions) or the government route (prior approval of the government required). The current FDI Policy (as updated periodically) specifies the permissible FDI limit and conditions for each sector. For example, FDI up to 100% is permitted under the automatic route in IT, e-commerce (marketplaces), and manufacturing, while certain sectors (insurance, banking, defence, media) have specific caps and conditions. Instruments of Investment: FDI in Indian private limited and public limited companies can be through: (i) equity shares (including ESOP and sweat equity); (ii) compulsorily convertible preference shares (CCPS); (iii) compulsorily convertible debentures (CCDs); (iv) optionally convertible instruments that comply with FDI rules. The SEBI's Foreign Portfolio Investor (FPI) regime applies to listed company investments by registered foreign portfolio investors.
A Term Sheet (India) does not legally require a lawyer in India, and individuals and businesses may draft and execute the document independently. The Indian Contract Act, 1872 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified India lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The Supreme Court of India has jurisdiction over disputes arising from this type of document, and Registrar of Companies (ROC) may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.
A Term Sheet (India) does not legally require a lawyer in India, though legal advice is recommended. Under Indian law, the Indian Contract Act 1872 governs agreements. The Companies Act 2013 and Registrar of Companies (ROC) regulate corporate documents. The Information Technology Act 2000 governs electronic contracts and data protection. The Consumer Protection Act 2019 provides consumer rights. The Income Tax Act 1961 requires tax compliance. Forms-legal.com provides this template as a starting point — always review with a qualified Indian advocate for significant transactions. Under India law, Indian Contract Act, 1872, parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Indian law, the Indian Contract Act 1872 governs contractual obligations, with Section 10 setting essential requirements for valid agreements. The Companies Act 2013 regulates corporate entities through the Registrar of Companies (ROC) and Ministry of Corporate Affairs (MCA). Forms-legal.com provides this template as a starting point for India-compliant documentation.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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