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Funding Term Sheet

Funding Term Sheet Template for Pakistan

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Key Requirements PROMPT example:

Funding Term Sheet

"I need a Funding Term Sheet for a Series A investment round of $2 million in my Lahore-based tech startup, with the investment expected to close by March 2025; the document should include standard venture capital terms and protection for both local and foreign investors."

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Document background
The Funding Term Sheet is a crucial document in Pakistani investment transactions that precedes definitive agreements and outlines the fundamental terms of a proposed investment. It is typically used when companies seek external funding from investors, whether through equity, convertible instruments, or other investment structures. The document must comply with Pakistani legislation including the Companies Act 2017, Securities Act 2015, and relevant foreign investment regulations when applicable. While mostly non-binding (except for specific provisions like confidentiality and exclusivity), the term sheet serves as a roadmap for lawyers drafting final agreements and helps parties align on key commercial terms early in the negotiation process. It includes essential information about valuation, investment structure, investor rights, governance, and exit provisions, tailored to meet both local regulatory requirements and international investment standards.
Suggested Sections

1. Parties: Details of the Company and the Investor(s), including full legal names and registration details

2. Background: Brief description of the Company, purpose of the investment, and context of the transaction

3. Definitions: Key terms used throughout the term sheet

4. Investment Amount: Total investment amount, tranches if applicable, and payment timeline

5. Valuation: Pre-money and post-money valuation of the Company

6. Investment Instrument: Type of securities being issued (e.g., preferred shares, convertible notes)

7. Key Terms: Core investment terms including pricing, rights, and preferences

8. Governance Rights: Board composition, voting rights, and major decision requirements

9. Exit Rights: Provisions regarding liquidity events, IPO, drag-along and tag-along rights

10. Confidentiality: Binding provisions regarding the confidentiality of the term sheet and negotiations

11. Closing Conditions: Prerequisites for completing the investment

12. Exclusivity: Period during which the Company cannot seek alternative investments

13. Binding Effect: Clarification of which provisions are binding and non-binding

Optional Sections

1. Anti-Dilution Protection: Protection mechanisms for investors against future down rounds, optional based on negotiation strength

2. Information Rights: Specific reporting requirements, included when investors require detailed oversight

3. Founder Vesting: Vesting schedule for founder shares, included when dealing with early-stage startups

4. ROFR and Co-Sale Rights: Right of first refusal and co-sale provisions, optional based on investor requirements

5. Employee Stock Option Pool: ESOP provisions, included when establishing or modifying employee stock options

6. Strategic Rights: Special rights for strategic investors, included when dealing with corporate investors

7. Shariah Compliance: Islamic finance provisions, included when required by investors or company policy

8. Foreign Investment Provisions: Special provisions for foreign investors, included when dealing with overseas investment

Suggested Schedules

1. Cap Table: Current and post-investment capitalization table

2. Use of Funds: Detailed breakdown of how the investment will be utilized

3. Key Financial Metrics: Summary of important financial metrics and projections

4. Milestone Schedule: If tranched investment, details of milestones triggering subsequent tranches

5. Material Contracts: List of material contracts and commitments

6. Existing Encumbrances: List of existing charges, liens, and encumbrances

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Company
Investors
Investment Amount
Closing
Shares
Securities
Pre-Money Valuation
Post-Money Valuation
Board of Directors
Preferred Shares
Conversion Rights
Anti-dilution Protection
Liquidation Preference
Tag-Along Rights
Drag-Along Rights
ROFR
ROFO
Material Adverse Effect
Confidential Information
Definitive Agreements
Due Diligence
Exclusivity Period
Founder(s)
Key Employees
Intellectual Property
Investment Instruments
Share Capital
Shareholders Agreement
Subscription Agreement
Voting Rights
Exit Event
IPO
Qualified Financing
Strategic Investment
Permitted Transferee
Reserved Matters
Pro-rata Rights
Information Rights
Put Option
Call Option
Encumbrance
Business Day
Applicable Law
Governing Law
Financial Year
Material Contracts
Clauses
Investment Terms
Valuation
Share Class Rights
Board Composition
Voting Rights
Reserved Matters
Pre-emptive Rights
Transfer Restrictions
Tag-Along Rights
Drag-Along Rights
Anti-dilution Protection
Liquidation Preference
Dividend Rights
Information Rights
Registration Rights
Representations and Warranties
Confidentiality
Exclusivity
Due Diligence
Conditions Precedent
Closing Conditions
Use of Proceeds
Employee Stock Options
Right of First Refusal
Right of First Offer
Put and Call Options
Exit Rights
IPO Rights
Non-Compete
Non-Solicitation
Dispute Resolution
Governing Law
Costs and Expenses
Binding Effect
Relevant Industries

Technology

Financial Services

Healthcare

Manufacturing

E-commerce

Telecommunications

Real Estate

Energy

Agriculture

Education

Retail

Infrastructure

Software

Biotechnology

Consumer Goods

Relevant Teams

Legal

Finance

Corporate Development

Executive Leadership

Investment

Compliance

Corporate Secretary

Business Development

Due Diligence

Strategy

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Investment Manager

Corporate Lawyer

Legal Counsel

Investment Banker

Venture Capital Partner

Private Equity Manager

Corporate Development Director

Business Development Manager

Financial Controller

Company Secretary

Compliance Officer

Managing Director

Board Director

Investment Analyst

Due Diligence Manager

Industries
Contract Act 1872: Fundamental law governing contract formation, validity, and enforcement in Pakistan. Essential for ensuring the term sheet meets basic contractual requirements.
Companies Act 2017: Primary legislation governing company operations, share issuance, and corporate matters in Pakistan. Relevant for equity investments and shareholder rights.
Securities Act 2015: Regulates securities offerings and investments, crucial for structuring investment instruments and ensuring compliance with securities laws.
Foreign Exchange Regulation Act 1947: Governs foreign currency transactions and overseas investments. Important if the funding involves foreign investors or cross-border transactions.
Foreign Private Investment (Promotion & Protection) Act 1976: Provides protection and guidelines for foreign investments in Pakistan. Relevant if foreign investors are involved.
Income Tax Ordinance 2001: Governs taxation aspects of investments, including capital gains, dividend taxation, and other investment-related tax implications.
State Bank of Pakistan Act 1956: Relevant for compliance with banking regulations and monetary policies, particularly for debt financing components.
Competition Act 2010: May be relevant for large investments or if the funding involves merger or acquisition aspects.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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