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Funding Term Sheet Template for Hong Kong

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Key Requirements PROMPT example:

Funding Term Sheet

"I need a Funding Term Sheet for a Series A investment round of US$10 million in my Hong Kong fintech company, to be completed by March 2025, with specific provisions for US and Singapore-based venture capital investors, including enhanced information rights and board representation."

Document background
A Funding Term Sheet is a foundational document used in investment transactions to establish the preliminary understanding between investors and companies seeking funding. It is particularly relevant in Hong Kong's dynamic investment landscape, where it must comply with local securities regulations and corporate law requirements. The document typically precedes more detailed investment agreements and serves to memorialize key commercial terms, valuation metrics, and investor rights. While mostly non-binding, certain provisions like confidentiality and exclusivity are typically enforceable. The term sheet's structure and content are influenced by Hong Kong's common law system and local market practices, making it essential for both domestic and international investment transactions. It forms the basis for due diligence and the preparation of definitive agreements.
Suggested Sections

1. Parties: Identification of the company, lead investor(s), and other participating investors

2. Background: Brief description of the company, purpose of the investment, and current fundraising round

3. Definitions: Key terms used throughout the term sheet

4. Investment Terms: Amount of investment, valuation, price per share, and investment structure

5. Closing Conditions: Conditions precedent to closing, including due diligence, board approval, and regulatory requirements

6. Use of Proceeds: Intended use of the investment funds

7. Investor Rights: Key rights including information rights, board representation, and protective provisions

8. Transfer Restrictions: Limitations on share transfers, right of first refusal, co-sale rights

9. Confidentiality: Confidentiality obligations regarding the term sheet and negotiations

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

11. Exclusivity: Period during which the company cannot seek alternative investments

12. Expiration: Validity period of the term sheet

Optional Sections

1. Convertible Terms: For convertible investments: conversion price, caps, discounts, and triggering events

2. Anti-dilution Protection: Include when sophisticated investors require protection against down rounds

3. Liquidation Preference: Terms for preferential returns in liquidation events, typically for Series A or later rounds

4. Participation Rights: Include for preferred shares with participation rights beyond liquidation preference

5. Dividend Rights: Include when specific dividend rights are part of the investment terms

6. Drag-Along Rights: Include in later-stage investments to force minority shareholders to join in company sale

7. Registration Rights: Include for US investors or when IPO is a likely exit route

8. Employee Share Option Pool: Include when new ESOP is being created or existing pool is being expanded

Suggested Schedules

1. Cap Table: Pre and post-money capitalization table showing ownership structure

2. Key Terms Summary: Summary of key commercial terms in table format for quick reference

3. Milestone Schedule: If investment is tranched, details of milestones and corresponding investment amounts

4. Pre-Closing Checklist: List of required documents and actions to be completed before closing

Authors

Alex Denne

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

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Relevant Industries

Technology

Financial Services

Healthcare

E-commerce

Manufacturing

Real Estate

Consumer Goods

Media and Entertainment

Education

Clean Energy

Biotechnology

Software

Artificial Intelligence

Retail

Transportation

Agriculture

Professional Services

Relevant Teams

Legal

Finance

Corporate Development

Executive Leadership

Investment

Compliance

Company Secretarial

Board of Directors

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

Investment Director

Corporate Lawyer

Investment Manager

Venture Capital Partner

Private Equity Manager

Company Secretary

Corporate Development Manager

Finance Director

Legal Counsel

Investment Analyst

Compliance Officer

Board Director

Managing Partner

Founder

Industries








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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