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Heads of Agreement / Term Sheet – Sale of Business

A Heads of Agreement (or term sheet, memorandum of understanding or letter of intent) is a document that sets out the main terms and conditions of an agreement between parties before they enter into a contract. This term sheet is designed to specifically cater for the sale or purchase of a business.

A Heads of Agreement may be binding or non-binding on the parties. If it is binding, and only subject to the preparation of legal documentation, then the term sheet must be detailed and outline all the clauses to be included in legal documentation to be subsequently prepared by the parties. If it is non-binding, then there may be in principle agreement by the parties of a proposal, setting out the terms proposed by one of the parties in relation to the proposed transaction.

After the parties have executed a Heads of Agreement, a legally binding contract should be negotiated, prepared and executed by the parties, which should contain detailed provisions and govern all aspects of the proposed transaction.

It is important to keep in mind that following a Heads of Agreement, you will require a Sale of Business Agreement.

As a member, you can request unlimited legal documents to be drafted or reviewed for your business, including this Heads of Agreement / Term Sheet – Sale of Business. Our membership also provides unlimited legal advice consultations, faster turnaround times and ongoing legal support for an affordable monthly fee.
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Heads of Agreement / Term Sheet – Sale of Business

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What's included?

LegalVision’s Heads of Agreement template sets out:

  • definitions of the parties and the transaction
  • an assets to be purchased clause
  • a costs clause
  • conditions precedent to completion clause
  • a non-disclosure agreement clause
  • a confidentiality clause

The document is 9 pages long and contains 15 sections.

This template contains the basic requirements of a Heads of Agreement in respect of a potential business acquisition, under which a prospective seller and a buyer of a business agree on the key commercial terms of the sale. It is prepared from the perspective of the seller. If you are a buyer and need to prepare the heads of agreement then this template will need amending.

When agreeing on the key commercial terms for the sale of a business, there are numerous matters which must be considered. These include what assets are to be included in the sale, how and when the purchase price will be paid and the conditions precedent required for the particular transaction.

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