SINGAPORE Law and Practice Contributed by: David He, Benjamin Teo, Kinnari Sahita and Binh Vong, Gunderson Dettmer Singapore LLP
4. Government Inducements 4.1 Subsidy Programmes Government Programmes
through a survival period, de minimis thresholds and baskets. Recovery from founders is usually limited to the value of their shares in the com - pany. Early investors should be mindful that draconian indemnity terms with lengthy survival periods will be viewed unfavourably by future investors, who will not want their invested capital to backstop the indemnity rights of their prede - cessors. Disclosure Schedules Disclosure schedules play an important role in qualifying the warranties made in the subscrip - tion agreement. General data room disclosure, whereby all documents uploaded to the data room on a given date are deemed disclosed, is typically paired with specific disclosures. In such cases, parties usually negotiate for “fairly disclosed” concept. Post-closing Covenants Deficiencies identified during the diligence and disclosure process may be rectified pre-closing or deferred to post-closing covenants. Requiring matters to be resolved on a post-closing basis may be preferable if the matter is not material and if parties are aligned on closing expediently. Enforcement for Breach For reputational and cost reasons, it is rare for a VC to bring legal action against a company on the basis of a breach of warranties or covenants in the absence of fraud or gross negligence. As a result, investors should ensure that they thor- oughly assess the reputation and capabilities of founding teams as well as the internal controls and governance of the company prior to closing.
The Singapore government provides a number of grants for supporting local founders and start- ups. These include: • the Start-up SG Founder Grant, which covers a wide scope of business ideas; • the Start-up SG Tech Grant, which focuses on new or early-stage start-ups; and • the Enterprise Development Grant, which focuses on growth and technology adoption. Such grants are typically only available to Singa - pore-incorporated entities that satisfy minimum Singapore citizen/permanent resident ownership requirements. Seeds Capital, the investment arm of Enterprise Singapore, incentivises equity financings in Sin - gapore-based start-ups by providing co-invest - ments alongside a list of approved VC funds. Deep tech companies are eligible for higher co- investment. 4.2 Tax Treatment Tax Treatment of Start-up Equity There is no capital gains tax regime in Singa - pore, but, at the point of sale or transfer, stamp duty is payable to the Inland Revenue Authority of Singapore (IRAS) at the higher of 0.2% of: • the consideration received for the sale of such shares; or • the net asset value (NAV) of the relevant shares. The IRAS prescribes guidelines on the calcula - tions of NAV of shares for the purposes of stamp duty. Generally, dividends distributed by Singa -
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