Term Sheet Checklist for Founders Outside the US: What Changes When You're Not a Delaware C-Corp

A term sheet checklist has five items that matter in every jurisdiction: the option pool timing behind the headline valuation, the liquidation preference multiple and structure, protective provisions, board composition, and anti-dilution. Founders outside the US need a sixth, and it's the one most checklists never mention — whether your company's actual legal structure can execute what the term sheet assumes. A lot of term sheet language is written for a Delaware C-corp, and outside Delaware, the mechanics of getting a round approved and shares issued can look nothing like what the document describes.

The five terms that decide the round, in the order they actually bite

Valuation and the option pool shuffle. The headline number on a term sheet is pre-money valuation plus the amount raised equals post-money. What most founders miss is which side of that math absorbs the new employee option pool. If the term sheet sizes a 10% pool and has it created before the investment is counted — inside the pre-money — that dilution comes entirely out of existing shareholders, mostly founders. If it's created after, the new investor shares in diluting it too. Same headline valuation, different real ownership. Model the round on a fully diluted, post-pool basis before you compare offers, not the pre-money number the term sheet leads with.

Liquidation preference. This is the term that decides who gets paid first, and how much, if the company sells for less than everyone hoped. A 1x multiple returns the investor's money before anyone junior gets paid; a 2x multiple returns double. Whether it's participating (investor takes the preference and shares in what's left) or non-participating (investor picks one or the other) matters more than the multiple itself — participating preferred is the term most likely to quietly cost founders money at a mediocre exit. We've written a full breakdown of how this term behaves, including why the entity you're incorporated as changes whether you can grant it at all, in liquidation preference explained.

Anti-dilution. Protects the investor if a later round prices lower than theirs. Broad-based weighted average is the standard, founder-reasonable version — it softens the blow proportionally. Full ratchet resets the investor's price to match the down round entirely, which can wipe out founder ownership in a way that's wildly disproportionate to how much the price actually dropped. If a term sheet has full ratchet, treat it as a term to negotiate away, not a formality to sign past.

Protective provisions. These are the actions your company can't take without investor sign-off — usually at the board level, sometimes requiring a separate vote of the preferred shareholders as a class. Standard provisions cover raising more equity, selling the company, amending the charter, and taking on debt past a set threshold. All of that is normal. What isn't normal: investor approval required to hire above a certain salary, approve routine budgets, or open a new office. Those aren't downside protections — they're operating control, and they belong in a different conversation than a seed or Series A term sheet.

Board composition. Who sits on the board after the round closes determines who runs the company between rounds, not who owns the most equity. A commonly cited founder-friendly baseline at Series A is two founder seats, one investor seat, one independent seat both sides agree on — founders keep a working majority, the investor still has real visibility. An investor board majority this early, before the company has leverage from a track record of later rounds, is worth flagging.

The item every US-written checklist skips

Every term sheet guide written for the US market assumes a Delaware C-corp: one board, board consents that execute fast, preferred stock that's been a routine share class for three decades. Outside that default, the legal mechanics in the term sheet don't automatically map onto how your company actually approves a round — and this is where founders in Riyadh, Lagos, or Jakarta get surprised weeks after signing, not at the table.

Nigeria. Under CAMA 2020, increasing issued share capital and allotting new shares requires a resolution passed at a general meeting — not a board resolution alone — and the Corporate Affairs Commission has to be notified of the allotment within 15 days. A term sheet that assumes the round closes the moment the board signs off is describing a step your company legally can't skip.

Saudi Arabia. A standard joint stock company (JSC) needs an extraordinary general assembly to approve a capital increase, with quorum and voting thresholds set by the bylaws — the board alone can't authorize new shares. The newer simplified joint stock company (SJSC) structure is more flexible: it can be governed by a president, a manager, or a board without a mandatory general assembly requirement, which is one reason growth-stage KSA startups increasingly convert to an SJSC ahead of a priced round rather than staying an LLC or standard JSC. Which structure you're actually incorporated as changes how many steps stand between a signed term sheet and money in the bank.

UAE. Until October 2025, a mainland LLC's share structure was uniform — one class, equal rights across shareholders — which meant it couldn't cleanly carry the multi-class preferred stack a standard term sheet describes. Federal Decree-Law No. 20 of 2025 changed that, letting mainland LLCs issue distinct share classes with different liquidation, voting, and profit rights. Before the reform, the standard workaround was holding the operating company under an ADGM or DIFC entity, both common-law free zones that have supported this structure for years. If your company predates the reform and hasn't restructured, check with counsel before assuming the term sheet's share-class language applies as written.

None of this changes what the term sheet's economics mean. It changes how many extra steps — and how much extra time — stand between a signed term sheet and an actually-issued, actually-approved round. A US investor's lawyer drafting from a template won't always know to ask.

What to do with this before you sign anything

A term sheet is non-binding on economics but sets the frame everyone negotiates the definitive documents against — so the leverage to fix a bad term is highest before you sign it, not after. Three things worth doing in the days you have it:

1. Model the round on a fully diluted basis, including the option pool at its post-money size, before comparing it to any other offer or to your current cap table.
2. List every protective provision and ask which ones are standard versus which ones extend into operating control — a lawyer who's closed rounds in your jurisdiction will know the difference faster than a generic checklist will.
3. Confirm which corporate approval your entity actually needs — a board resolution, an extraordinary general assembly, a shareholders' special resolution — and how long that process realistically takes, so the term sheet's closing timeline isn't a surprise later.

Once the round is signed, the paperwork doesn't stop. Govy's round tracker holds the raise against target with soft-circled commitments, and a signed SAFE converts to a priced round with one click when that day comes. If your jurisdiction requires a general assembly to approve the new share class or capital increase — as many do outside Delaware — Govy's governance module runs that assembly: quorum computation, shareholding-weighted voting, minutes, all in the same ledger as the cap table it's approving changes to. None of that replaces the lawyer who should review your specific term sheet. It's what happens correctly, and on the record, after they have.

See how the round tracker, general assembly governance, and cap table sit on one ledger at govy.tech.

FAQ

What should I check first on a term sheet?

Run the option pool math before anything else. A term sheet that sets the option pool as part of the pre-money valuation shrinks founder ownership more than a lower headline valuation would, and it's the single item most founders miss on a first read. After that, check the liquidation preference multiple and whether it's participating or non-participating — those two terms decide who gets paid first and how much at a mediocre exit, which is the outcome range that actually matters.

What is the option pool shuffle?

It's when an investor sizes the new employee option pool — say, 10% — and has it created before the investment is counted, so it dilutes only the existing founders and shareholders instead of being split between them and the new investor. The headline valuation looks the same on paper, but founders end up with a smaller real percentage than the round's stated price implies. Modeling the round on a fully diluted, post-pool-creation basis before signing is the only way to see the actual number.

Are protective provisions negotiable?

Yes, and they should be negotiated as hard as valuation. Standard protective provisions — investor approval to raise more equity, sell the company, amend the charter, or take on debt above a threshold — are normal and expected. Non-standard ones, like requiring investor sign-off to hire above a certain salary or approve routine budget items, are a sign the investor wants operating control, not just downside protection, and are worth pushing back on before you sign.

Can a company outside the US skip the general assembly and just get board sign-off on a priced round?

Usually not, and this is where US-written term sheet guides mislead non-US founders. In Nigeria, CAMA 2020 requires a resolution at a general meeting to approve the allotment of new shares, not just a board vote. In Saudi Arabia, a standard joint stock company needs an extraordinary general assembly to approve a capital increase — only the newer simplified joint stock company (SJSC) structure lets bylaws skip that requirement. Check your entity type before you assume the US mechanics in the term sheet map cleanly onto your cap table.

What's a founder-friendly board structure at Series A?

A commonly cited baseline is two founder seats, one investor seat, and one independent seat agreed by both sides — giving founders a working majority without shutting the investor out of governance entirely. An investor-majority board at Series A, before the company has any negotiating leverage from later rounds, is a term worth flagging rather than accepting as standard.