Term Sheet
The non-binding Letter of Intent, also called the Summary of Principal Terms, entered into by the manager with a potential investee company.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Catch up clauseThe waterfall step that pays the manager a set share — often 100% — of the profit left after investors receive their capital and hurdle, until the manager reaches its agreed share of total profit.
- CIV schemeA separate one-deal scheme of a Category I or II AIF through which accredited investors of that scheme co-invest alongside the fund in a single investee company, without a portfolio manager registration.
- ClawbackAn investor right to recover carried interest already paid to the manager on early successful exits, when later failed investments mean the manager was overpaid across the fund's whole life.
- Co-investmentInvestment by a manager, sponsor or investor of a Category I or II AIF directly into an investee company that the AIF is itself investing in, alongside the fund rather than through it.
- Compliance Test ReportThe annual self-certification an AIF manager prepares in SEBI's prescribed format, testing the fund against the AIF Regulations and routed through the sponsor and trustee for comment.
- Fit and proper personThe character and record test in Schedule II of the SEBI (Intermediaries) Regulations, 2008 that an AIF's applicant, sponsor and manager must satisfy for registration and must keep satisfying afterwards.
Where this is taught
Free preparation for NISM Series XIX-DRelated terms
- Right of First RefusalA shareholder right to match the best outside quote a selling shareholder has obtained — the holder sees the price first and may buy at it, or refuse and let the sale proceed.
- Full RatchetThe harshest anti-dilution formula: after a down round, the earlier investor's preference shares convert at the lowest price the company has issued at, as though it had invested at that price all along.
- Option poolThe block of shares a company sets aside for employee stock options — its size matters to an investor because every option exercised dilutes the investor's stake.
← All terms