A term sheet shows negotiated intentions but is not the final purchase agreement, so both documents should be kept and compared. Identify which terms in the term sheet are described as binding and which remain subject to a definitive agreement still being drafted.
Keep the negotiation record and the final agreement both visible
Ask counsel which term-sheet provisions are legally binding now and which are conditions to be finalized later, and update the file once the definitive purchase agreement is signed rather than continuing to rely on the term sheet's language. A reviewer comparing an outdated term sheet to a materially different final agreement may question which document reflects the actual transaction.
Compare the term sheet with the definitive agreement: price, deposits, refunds, ownership, voting rights, collateral, and closing contingencies. E-2 requires the investor to have nationality of a qualifying treaty country; Canadian permanent residence alone is insufficient. The enterprise needs treaty nationality through at least 50% ownership by nationals of that treaty country, and the investor must develop and direct it, ordinarily shown through at least 50% ownership or operational control through a managerial position or other corporate device. Substantiality is proportional, not a fixed minimum; qualifying funds are irrevocably committed and at risk, although investment may still be underway. A frequent error is treating every stated purchase-price dollar as already committed capital.
Hypothetical example: a Canadian citizen in Clarence-Rockland signs a term sheet to acquire an American organic-fertilizer blending business, but the seller retains voting rights until a refundable diligence period ends. Counsel maps present obligations and delays control claims until final documents establish them. Bank records trace the buyer’s deposits, while the capitalization table tests treaty ownership after closing. If negotiations materially change seller rights or refundability, the E-2 assessment is updated instead of forcing the transaction into assumptions drawn from the earlier term sheet.