The Difference Between Term Sheet and Shareholders Agreement
In the world of business and legal agreements, there are many terms and phrases that can sometimes be confusing. Two commonly used terms in this context are the term sheet and the shareholders agreement.
A term sheet is a non-binding document that outlines the key terms and conditions of a potential investment or business agreement. It serves as a starting point for negotiations between parties involved and provides a framework for further discussions. It typically includes information about the price and structure of the deal, key deadlines, and any conditions that need to be met for the agreement to proceed.
On the other hand, a shareholders agreement is a legally binding contract that governs the relationship between the shareholders of a company. It is usually entered into after the initial investment has been made and the company is already established. The shareholders agreement covers various aspects such as the rights and obligations of shareholders, dispute resolution mechanisms, restrictions on the transfer of shares, and the management and operation of the company.
Understanding the differences between these two documents is crucial for parties involved in a business transaction. While a term sheet is a preliminary agreement that sets the stage for further negotiations, a shareholders agreement is a binding contract that governs the ongoing relationship and obligations of shareholders.
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