Why do I need a Term Sheet for Sale and Purchase of Shares (All or Majority of Shares)?
This Term Sheet is a handy, cost-effective tool for shareholders starting negotiations with someone to buy all (or a majority of) the shares in a privately owned NZ company. If only one shareholder is selling a minority shareholding in the company, you need our Term Sheet for Sale and Purchase of Shares (one minority shareholding).
The Term Sheet sets out the key points for a proposed sale and purchase of shares as a precursor to the more detailed and legally binding Agreement for Sale and Purchase of Shares (all or majority). It isn’t essential to agree a Term Sheet before the binding agreement (as straightforward deals may be able to bypass this step). However, for more complex transactions, ensuring the seller(s) and buyer are generally on the same page from the get-go can save loads of time, legal fees and disruptive protracted negotiations down the road. It should also result in easier and faster negotiation of the Agreement for Sale and Purchase of Shares (and reduced legal fees) as the groundwork is already done.
Using our Term Sheet should help identify any road blocks, misunderstandings or major discrepancies in expectations between the seller(s) and a potential buyer. Much better to find out upfront than after you’ve spent a fortune on lawyers!
When you purchase our Term Sheet, we'll provide you with a 40% off discount code to use on your subsequent purchase of our Agreement for Sale and Purchase of Shares (All or Majority of Shares).
What’s in a Term Sheet for Sale and Purchase of Shares?
The terms are non-binding, meaning they do not create any legal rights or obligations to sell or purchase shares, and are to be used for discussion and negotiation purposes only. A binding agreement won’t exist until the seller(s) and the buyer have signed a legally binding Agreement for Sale and Purchase of Shares. However, there are a couple of key exceptions where the terms are binding – confidentiality (information shared between the parties must be kept secret) and optional exclusivity (the parties can’t discuss the proposed deal with anyone else for an agreed time). The term sheet is also governed by NZ law.
The Term Sheet sets out all the essential terms of a sale and purchase of shares transaction, such as indicative price, timing of payment, pricing assumptions, optional price adjustment for changes in working capital, conditions, optional handover assistance terms, timeline and optional non-competition and non-solicitation restraints.
How long will it take to create my document?
10 minutes – less time than doing the coffee run! You will need to complete the Q&A within one month (following that your access will expire). Please reach out to us at hello@onyourterms.co.nz if you have any issues. During this access period, you can come back and re-input your answers to the questions to reflect any positions you have negotiated (to generate an amended document).
What information do I need to complete the Q&A?
- The name and contact details of the seller and buyer
- Indicative purchase price and payment terms (will a deposit be paid?)
- Whether the price will be adjusted for changes in working capital
- Matters the proposed transaction is conditional on (due diligence and signing an Agreement for Sale and Purchase of Shares are automatically included, but what about buyer finance or the buyer signing up to the shareholders agreement?) and the date these conditions need to be met
- Completion date (also known as settlement date)
- Optional non-competition and non-solicitation terms – will the seller be prevented from competing with the business or encouraging clients or staff to terminate or reduce their dealings with business for a fixed time (and in a certain area) after completion?
- Timetable for signing the Agreement for Sale and Purchase of Shares
What if I need help?
On Your Terms has teamed up with Luminate Legal to offer its customers the option of obtaining legal advice from a lawyer to provide extra assurance and peace of mind. If you would like to ask a lawyer some quick questions about your document (or your responses to the Q&A), or have your document reviewed/edited by a lawyer, click here to view and select Luminate Legal's packages and fixed-fee pricing exclusively for On Your Terms customers.
What do I do once my Term Sheet for Sale and Purchase of Shares is created?
The term sheet is ready to be used as part of negotiations, and then signed by both parties, as soon as you have downloaded it. Your document will be in Word so you can amend it if necessary. During your access period to the product, you can also re-input answers to reflect negotiated positions.
What are some other names for Term Sheet?
A term sheet is also known as a Memorandum of Understanding, MOU, Heads of Agreement, Letter of Intent, Initial Offer or Expression of Interest.
Other helpful information:
- If you are selling the business (ie, assets) of the company (as opposed to the shares), you instead need our Term Sheet for the Sale and Purchase of Business
- Check out our blogs: How to transfer shares in a New Zealand company, Selling Up Shop: What happens to employees when a business is sold?
- You may also find these bundles or documents useful for your business: Shareholders' Agreement and Constitution Bundle, Mutual Confidentiality Agreement, Term Sheet for Shareholders Agreement, Transfer of Company Shares and Approvals Bundle, Agreement for Sale and Purchase of Shares (all or a majority), Shareholders' Agreement
- Check out our FAQs here
If you’re unsure whether this Term Sheet is what you need, reach out to us at hello@onyourterms.co.nz – we’re happy to help!
If you’re not satisfied with your purchase of this product for any reason, let us know why within 10 days of your purchase and we’ll work with you to make sure you’re happy, including giving you a full refund if necessary.
Disclaimer: On Your Terms was created to provide fast, easy and affordable access to legal information and documentation. We are not a law firm and do not provide legal advice. The information and documents we provide are of a general nature, designed for common situations, and may not be suitable for your needs or circumstances. If you need legal advice, we have a network of specialist law firm partners able to help you here.