Key terms to understand before signing
Most negotiations focus on two areas — economics and control:
- Valuation, price per share and the option pool
- Liquidation preference and whether it is participating
- Anti-dilution protection
- Board composition and observer rights
- Protective provisions (investor vetoes)
- Pre-emption, drag-along and tag-along rights
- Founder vesting, leaver terms and restrictive covenants
- Information rights and use of proceeds
Binding and non-binding terms
Most term sheets state that their commercial terms are not legally binding, while confidentiality, exclusivity and costs provisions are. An exclusivity clause can stop you speaking to other investors for a period, so its length matters.
After signing, the terms are reflected in a share subscription agreement and updated shareholders' agreement and articles. In Kenya, the allotment of new shares must follow the Companies Act 2015 and the company's articles, including any pre-emption rights and the required filings with the Registrar.
Common risks and mistakes
- Focusing only on valuation while accepting onerous preferences or vetoes.
- Agreeing long exclusivity periods without a clear timetable to close.
- Stacking SAFEs or notes without modelling dilution at conversion.
- Long-form documents that conflict with the company's existing articles.
Who should seek counsel
- Founders raising pre-seed, seed or Series A rounds
- Angel investors and syndicates
- Venture funds investing into Kenyan companies
- Companies converting SAFEs or notes into equity
How we work
- 1Term sheet reviewWe explain each term, flag what is unusual and suggest a negotiating position.
- 2NegotiationWe negotiate with the investor's or company's counsel on the points that matter most.
- 3Long-form documentsWe prepare or review the subscription agreement, shareholders' agreement and articles.
- 4ClosingWe manage approvals, allotment, share certificates and filings with the Registrar.
Advocates for this matter
Frequently asked questions
Usually not, except for specific clauses such as confidentiality, exclusivity and costs, which are typically stated to be binding. The wording of the term sheet itself determines this.
It determines who gets paid first, and how much, when the company is sold or wound up. A 1x non-participating preference returns the investor's money first; participating preferences give investors more and should be considered carefully.
SAFEs and convertible notes are used by Kenyan startups, often adapted from international templates. They should be reviewed for consistency with the company's articles and Kenyan company law, and the conversion mechanics should be modelled.
Typically the allotment of shares and any changes to the articles and directors must be filed with the Registrar of Companies, and statutory registers updated. Beneficial ownership records may also need updating.
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This page gives general information about Kenyan law and is not legal advice for your situation. Contacting us does not create an advocate–client relationship. Last reviewed 8 Oct 2026.