We use cookies to improve security, personalize the user experience, enhance our marketing activities (including cooperating with our marketing partners) and for other business use.
Click "here" to read our Cookie Policy. By clicking "Accept" you agree to the use of cookies. Read less
A term sheet for convertible preferred stock is a document that outlines the key terms and conditions of an investment agreement for preferred stock that can be converted into common stock.
The purpose of a term sheet for convertible preferred stock is to define the rights, obligations, and preferences of the investors and the company regarding the investment in preferred stock.
Key terms covered in a term sheet for convertible preferred stock include conversion rights, liquidation preferences, voting rights, dividend preferences, anti-dilution provisions, and protective provisions.
The conversion right in a term sheet allows the holder of the convertible preferred stock to convert their shares into common stock based on a predetermined conversion ratio.
Liquidation preferences determine the order in which the proceeds from the sale or liquidation of the company's assets are distributed to the investors. Preferred stockholders typically have a higher priority over common stockholders.
Yes, convertible preferred stockholders usually have voting rights, although they may be limited compared to common stockholders. The term sheet specifies the extent of these voting rights.
Dividend preferences specify whether and how much dividends are paid to the holders of convertible preferred stock. These preferences can be cumulative, non-cumulative, or participating.
Anti-dilution provisions protect convertible preferred stockholders from dilution of their ownership percentage in the event of future equity issuances at a lower price.
Protective provisions grant certain rights to the holders of convertible preferred stock, such as approving significant corporate actions or preventing actions that could adversely affect their investment.
Reviewing a term sheet for convertible preferred stock is crucial to fully understand the terms and conditions of the investment, assess the impact on existing shareholders, and negotiate favorable terms.
Purchase Agreement Form Template Trusted and secure by over 3 million people of the world’s leading companies