Fall Away Right

Explaination: Fall Away Right as the name suggests falling away of the rights of the parties in case their shareholding or stake falls below a certain threshold. How it applies to Startup/Investor and its impact: Fall away right is generally event based and connected with the shareholding of the P...
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Information and Inspection Rights

Explaination: Information rights terms are included for the benefit of investors, providing them with information via periodic reports from the promoters such as cash flow statements, balance sheets, business and marketing plans etc. Information rights term also includes the right to visitation and...
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Lock-in Period

Explaiantion: Founders shares are normally subjected to a lock-in period. During this time, they are not allowed to sell or transfer their shares to any third party. In case the founder decides to leave the company before the expiry of the lock-in period they must sell their shares at face value to...
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Board Structure

Explaination: The term related to Board Structure in the Term Sheet stipulates about representation of the Investor(s) on the Board of the Company. This can be either by appointing an Observer to the Board of the Company or the Director. How it applies to Startup/Investor and its impact: Generally...
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Investor’s Right to Transfer

Explaination: This terms provides investors with the right to transfer any or all of their shares in the company as per their own discretion except to the Competitors. How it applies to Startup/Investor and its impact: Not only the Founder’s, Investors also wish to sell or transfer their sha...
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Tag Along Right

Explaiantion: Tag along rights allow minority shareholders to join in a transaction wherein a majority shareholder is selling their stake in the company. With the inclusion of a tag along rights clause the majority shareholders must include the holdings of a minority shareholder while negotiating t...
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Right of First Offer (ROFO)

Explaination: The Right of First Offer refers to the right of investors to have the opportunity to purchase the shares of the selling Founders or other investors at the first place, but in ROFO purchasing investors needs to first state the price they are willing to pay unlike ROFR wherein the price...
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Right of First Refusal (ROFR)

Explaination: The Right of First Refusal refers to the right of investors to have the opportunity of matching the price at which a third party has agreed to buy shares from existing investors or founders. How it applies to Startup/Investor and its impact: Investors generally negotiate for ROFR whe...
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Anti-Dilution

Explaination:  Anti-dilution terms are required in order to protect Investors from the dilution of equity when shares are issued at a later date and at cheaper prices than when those investors had originally paid. How it applies to Startup/Investor and its impact:  An anti-dilution provision is es...
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Pre-emptive Right

Explaination: The right of pre-emption for new issues of securities states that when a company issues new Equity Securities after the Closing Date then investors are given a pre-emptive right to subscribe to a number of shares calculated as per their proportion of shareholding How it applies Startup...
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