A SET of free legal documents crafted for early-stage startups has been updated to reflect the latest trends in the market, including environmental, social and governance (ESG) letter agreements for investors making such commitments.

The Venture Capital Investment Model Agreements (VIMA) was launched in October 2018 to provide resource-stretched business founders with standard legal documents as they raise their first rounds of funding.

These documents allow parties to negotiate with a common understanding of the general structure of definitive agreements, and come as venture capital (VC) investments in South-east Asia soared 1.6 times last year to hit a record US$20.4 billion.

The Singapore Academy of Law (SAL) and Singapore Venture and Private Capital Association (SVCA) led the initiative to update the documents. This involved 32 members of a working group – spanning law firms, venture investors and startups – contributing on a pro bono basis over 2 years. An industry consultation involved more than 50 industry stakeholders.

“(A startup’s early days are) often a challenging period as founders must divide valuable time and resources between drafting legal documents and growing the company’s business. Free legal model agreements for their early transactions can alleviate this pain point and allow founders to focus on improving their products and services,” said working group chair Gregory Tan, an SAL member and deputy general counsel, legal and regulatory, at Temasek.

VIMA 2.0, as the update is termed, revised the initial model agreements and incorporated more annotations and alternative provisions.

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New documents have been added, such as a model company constitution and a primer and schedule for employee share option plans (ESOPs).

The ESG letter agreement includes examples of how ESG-related provisions can be incorporated in an investment through a share financing or convertible note financing.

Since 2018, VIMA documents have been downloaded more than 17,000 times from SVCA’s website and used in workshops and masterclasses.

“The VIMA 2.0 documents are a labour of love,” said working group member Joel Shen, head of Withers Tech Asia and corporate partner at Withersworldwide.

“There has, for some years now, been increasing convergence and standardisation of investment terms across the global venture capital industry. The evolution of South-east Asia’s tech ecosystem, and increase in VC investments in the region, has resulted in a greater need for transparency and a better understanding of prevailing industry practices.”