Term sheet and non-disclosure agreement - why are they needed?

1. DOCUMENTS
TO BE
SIGNED
BEFORE DUE
DILIGENCE
H O W T O P R E P A R E
F O R D U E D I L I G E N C E

2. Term sheet
What is a term sheet?
A term sheet is essentially an outline of a proposed
transaction. The parties agree on basic, fundamental terms of
the deal.
Why it is needed?
By signing the term sheet, the start-up confirms its intent to
sell, and investor his intent to buy a part of the company. The
document gives a clear picture of how the deal will move
forward and prevents delays. Once a term sheet is negotiated
between the parties, the due diligence works may start.
Is a term sheet legally binding?
The term sheets are not generally legally binding documents.
How does a term sheet look like?
There’s no commonly agreed structure of the term sheet. It
can be as simple as a bullet point list or a chart with terms.
Also, the term sheet may change in the negotiation process.

3. Non-disclosure
agreement
What is a non-disclosure agreement?
It’s the first legal document most often signed at the
deal initiations. The document establishes the
conditions under which one party (the disclosing party)
discloses information in confidence to another party
(the receiving party).
Why it is needed?
Its purpose is to make sure that the party receiving
confidential information will not use that information
against the other party for its benefit. The NDA is
normally signed by a buyer and a seller but can also
be signed by an advisor and a seller or buyer.
Is it legally binding?
Yes.