Canopy Law > Shareholder Agreements > Why start with heads of terms?

Why start with heads of terms?

Just when you thought it was safe to get back in the water, here we are with the jargon again, gliding through the document like a hungry Great White.

A ‘Heads of Terms’ document is a useful way to get a Shareholder Agreement started, but first you need to know what it is. Loosely put, a Heads of Terms is a set of agreed principles that all parties wish to have included in the contract, a broad foundation for the nitty-gritty to be built upon.

Begin with a brief one page document summarising the main points, free from jargon and legalese, and allow all parties the opportunity to read and comment. Once everyone is happy with the broad brush strokes you can get down to filling in the detail. This is a really useful way to discover potential problems before investing time and effort in the creation of a legal document that you may subsequently need to unpick. Keeping things clear and simple at this stage should help prevent future problems.

Although, Heads of Terms are not usually binding, if for any reason you don’t quite get around to finishing your Shareholder Agreement, should any problems arise they can be useful in establishing intention.

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