Term Sheet Signed Is Not Money Received: Managing Conditions Precedent
A term sheet can create momentum without ensuring completion. Conditions precedent identify matters that must be satisfied or validly waived before the investment closes.
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Identify what is actually binding
Read the document rather than assuming the entire term sheet is non-binding or fully binding. Confidentiality, exclusivity, costs and dispute provisions may have a different status from the proposed investment. Contract Act principles and the wording require legal review.
Turn conditions into evidence
Typical workstreams can include corporate approvals, title remediation, lender consent, valuation, regulatory permissions and key contracts. Each condition should specify what evidence satisfies it and who accepts that evidence.
“Clean up all compliance” is difficult to close. A specific list of filings, approvals or corrected records is easier to manage. Have professionals decide which matters must precede completion and which can lawfully be post-closing obligations.
Expose circular dependencies
Suppose an investor requires a bank sanction, while the bank requires evidence of equity commitment. The answer is a coordinated closing sequence with acceptable documents, not two teams waiting for each other.
Likewise, if a release of security depends on repayment from the new investment, the parties need a lawful funds-flow and release mechanism. Informal assurances can leave the company exposed between steps.
Maintain a weekly completion review
- Condition and document reference.
- Responsible person and target date.
- Evidence submitted and outstanding questions.
- Authority to waive, if waiver is legally possible.
- Impact on the long-stop date and funding need.
Keep the cash forecast linked to the expected closing date. If completion slips, identify how payroll, suppliers and debt service will be funded. Do not spend against an uncommitted future tranche.
Close with a final consistency check
Reconcile the signed documents, amounts, bank accounts and securities. Confirm that material facts have not changed since diligence. Retain written completion confirmations and the final capitalisation table.
A term sheet becomes useful when it leads to an executable closing. The discipline is to replace broad expectations with evidence, responsibility and a realistic timetable before the business relies on the money.
Connect with Monei Matters
Discuss a practical closing plan and financing dependencies with Monei Matters.
Monei Matters
B-9, Near City Centre Market, Ramprastha, Ghaziabad, Uttar Pradesh 201011
Phone: +91 93138 03227 / +91 93110 03227
Website: www.moneimatters.com
Services include business finance, working capital, commercial mortgage/LAP, lease rental discounting, debt syndication, restructuring, settlements, FDI advisory and equity syndication.
Disclaimer
General information based on sources reviewed for the position as at 10 September 2026; not transaction-specific legal, tax or investment advice. Illustrations are hypothetical. Applicable law, documents and lender or investor terms govern each case; funding and settlement outcomes are not guaranteed.
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