SINGAPORE Law and Practice Contributed by: Terence Quek, Benjamin Cheong, Hoon Chi Tern and Favian Tan, Rajah & Tann Singapore
2.5 Venture Capital Documentation Law firms in Singapore tend to be experienced in handling the various types of documentation typically used for venture investments in start- ups, such as subscription agreements and shareholders’ agreements. Depending on the transaction structure, option agreements and warrant agreements can be entered into to meet the commercial objectives of the investment. A Typical Investment A typical investment would involve the investor(s) subscribing to shares using a sub- scription agreement, and the shareholders of the start-up company entering into a shareholders’ agreement to govern the rights of the investors. Shares subscribed to by investors are typically preference shares, which confer additional rights over ordinary shares – for example, conversion rights and dividend and liquidation preferences. VIMA Documentation For early-stage investments, investors and founders may consider using venture capital investment model agreements (VIMAs), a model documentation set first launched in 2018. The VIMA documentation was drafted with input from investors, law firms and other parties – including the Singapore Venture Capital & Private Equity Association – and aims to reduce the transaction costs and time taken in negotiation. The VIMA documentation is governed by Sin- gapore law and includes templates for non- disclosure agreements, convertible agreements regarding equity, convertible loans, term sheets, subscription agreements and shareholders’ agreements for a Singapore-incorporated pri- vate company. The initial model agreements have since been updated, and new documents are available
(both foreign and local venture investors) at the series A stage and beyond. There is no particu- larly dominant source of financing. Sovereign wealth funds may take stakes in start- ups, even in the early stages, if their business or technology would fulfil a national goal (eg, food security, financial services, health and tech- nological innovation). Government-sponsored funds may provide early-stage financing through matching investments (either debt or equity) with certain venture capital investors. Other forms of government support include the enterprise financing scheme and grants to fund operating costs and projects. However, govern- ment support and sponsorship are usually con- ditional on certain requirements being fulfilled, such as: • nationality requirements for ownership; and • a focus on certain areas (eg, advanced manu- facturing, medical technology, agriculture/ food technology). Investments and government grants are well documented through subscription agreements, debentures and warrants. These investments are private contracts and are usually kept confiden- tial. 2.4 Venture Capital Venture capital from both foreign and local ven- ture investors is readily available. Investments by government-linked corporations are also com- mon and available. As regards foreign venture capital funds, there is keen interest from inves- tors globally (including those from Asia, Europe and the USA).
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