Term Sheet & Shareholders Agreement (SHA) Advisory
Protect your founder equity, voting control, and future governance. SNB Consultancy provides strategic commercial evaluation of term sheets, Share Subscription Agreements (SSA), and Shareholders Agreements (SHA) during venture capital and angel funding rounds.
A Term Sheet is a non-binding preliminary agreement outlining the core commercial terms of an equity investment. Once executed, it leads to binding definitive agreements: the Share Subscription Agreement (SSA) and the Shareholders Agreement (SHA). Commercial clauses negotiated in these documents dictate founder control and payout hierarchy for years.
Our Term Sheet & SHA Advisory Services Include:
- Commercial evaluation of Term Sheet valuation, cap table impact, and tranche disbursement conditions
- Liquidation Preference analysis (1x Non-Participating vs. Participating structures)
- Anti-dilution protection evaluation (Broad-Based Weighted Average vs. Full Ratchet)
- Governance & Board Seat structuring (Reserved Matters, Affirmative Voting Rights)
- Pre-emptive rights, Tag-Along / Drag-Along rights, and Right of First Refusal (ROFR) drafting
Critical SHA Clauses Every Founder Must Understand
Venture capital term sheets contain complex legal mechanics that dictate corporate control and payout distribution during exit events:
Essential Term Sheet & SHA Clauses
| Clause Name | Legal Purpose & Impact | Recommended Founder Position |
|---|---|---|
| Liquidation Preference | Determines order of payout to investors vs founders during M&A or liquidation. | Insist on 1x Non-Participating preference to avoid double-dipping by investors. |
| Anti-Dilution Clause | Adjusts investor shareholding if future rounds are conducted at a lower valuation (down-round). | Negotiate Broad-Based Weighted Average anti-dilution instead of harsh Full Ratchet. |
| Pre-Emptive Rights (Pro-Rata) | Grants existing investors the right to participate in future rounds to maintain ownership %. | Standard for lead investors; restrict to major shareholders holding >5% equity. |
| Tag-Along & Drag-Along Rights | Tag-Along protects minority investors; Drag-Along forces all shareholders to sell during M&A. | Ensure Drag-Along triggers only with majority founder consent & minimum floor valuation. |
| Reserved Matters (Affirmative Voting) | List of operational & financial decisions requiring explicit investor nominee director approval. | Limit to structural changes (IP transfer, CapEx > threshold, merger) to retain operational speed. |
Documents Required for Term Sheet & SHA Legal Review
- Draft Term Sheet / Letter of Intent: Copy of the incoming investor proposal.
- Current Cap Table: Details of existing shareholding pattern, ESOP pool, and previous convertible notes (CCPS / CCDs).
- Constitutional MoA & AoA: Articles of Association to check existing transfer restrictions.
Related services
Other Fundraising & Valuation services SNB handles.
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