SINGAPORE Law and Practice Contributed by: David He, Benjamin Teo, Kinnari Sahita and Binh Vong, Gunderson Dettmer Singapore LLP
ware, or is, at a minimum, keeping track of its use of open-source software; and • in a minority of cases (primarily due to cost), that the company has conducted freedom-to- operate analyses in certain markets. Regulatory matters Companies operating in regulated sectors – such as direct-to-consumer goods, financial services (particularly payments and lending), insurance underwriting, education, healthcare and life sci - ences, and the development of critical technolo - gies with national security implications – should ensure they possess the requisite licences to operate. Compliance with local labour, tax and securities laws are also common focal points of due diligence. Non-legal Due Diligence Non-legal business and financial due diligence has historically been performed in-house but is increasingly being outsourced to professional vendors. This is particularly true in later-stage companies, where VCs frequently engage audit and forensics firms to review company accounts, examine ownership structures, conduct litigation searches and inspect the personal backgrounds of key personnel. Such qualitative diligence pro - cesses have become standard practice in recent years, and regional VCs are seeking increasingly higher reimbursements for their vendor expens - es as a result of such exercises. 3.2 Process Timeline for Growth-Stage Financing The timeline for a financing round in the growth stages ranges from 12-16 weeks from the sign - ing of a term sheet, and investors typically nego - tiate for an exclusivity period (during which the company must negotiate in good faith and must not actively solicit competitive term sheets) of 60 to 90 days. In the past few years, as growth
funding became less accessible, the commercial due diligence timeline leading up to a term sheet has expanded, with investors sometimes engag - ing in conversations with start-ups for months before seeking formal investment committee approval. For growth-stage companies with a large investor base, the tension between existing investors reluctant to concede favourable terms to new investors and new investors unwilling to fund without additional protections can result in a protracted negotiation and approval process. Involvement of Counsel Separate counsels are typically engaged by the lead investor and the company, and existing investors may also engage independent coun - sel to review revised agreements once these are substantially agreed with the lead inves - tor. Unsurprisingly, timelines and costs almost always directly correlate to the number of parties involved in negotiations, and it is not unusual for existing investors participating in a new round to seek expense reimbursement for their advisers. Consent Thresholds Shareholder agreements are typically structured to allow for new financings to take place and for amendments to be made without having to obtain unanimous shareholder consent. Howev - er, the consent of a specified majority of a class of shares is typically required. In addition, the con - sent of at least 75% of the outstanding shares (on an as-converted-to-ordinary-shares basis, in the case of preference shares) is required under the Companies Act to amend the constitution of the company, which is required to establish the rights of any new class of preference shares. The consent of a majority of the outstand - ing shares (on an as-converted basis) is also required under the Companies Act to issue new shares. Unless certain requirements are met,
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