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Standard contracts to make deal structuring easier for startups, venture capitalists
SINGAPORE Academy of Law (SAL) and Singapore Venture Capital & Private Equity Association (SVCA) together launched a set of standard form documents, targeted at making the process of structuring a deal faster and more cost-efficient for startup founders and venture capitalists.
Venture Capital Investment Model Agreements (VIMA) are a pragmatic set of contracts tailored closely to the essential requirements of startups, investors and the legal industry, and balances the interests of both the investor and the startup, said the SAL and SVCA on the joint initiative that was rolled out on Tuesday.
Targeted at the early stage - or known as pre-Series A - and Series A rounds of funding, the VIMA are a collection of non-disclosure agreement, term sheet, subscription agreement, shareholders’ agreement and a convertible agreement regarding equity (CARE), with each accompanied by an explanatory note.
CARE is a sample document typically used in seed financing rounds, and assumes that an investor is making a cash investment in a Singapore incorporated private company in exchange for receiving either shares in the company or cash upon occurrence of certain events.
The VIMA also features a glossary, to align the meanings of jargon and terms used in the venture capital (VC) industry.
SVCA and SAL do not attempt to cover in the VIMA the entire spectrum of options in a VC deal, but hope that the free kit would give startup founders an idea of how an early-stage transaction is typically structured, leaving parties to focus on addressing and negotiating issues specific to their deal, and incorporate the specifics into the documents.
According to the SVCA, VC investments into South-east Asia totalled US$3.16 billion in the first eight months of this year, surpassing the US$2.72 billion for the whole of 2017. Singapore captured the lion’s share at US$2.62 billion in January-August 2018, and US$1.85 billion last year. Chief Justice Sundaresh Menon in launching the VIMA at the SAL 30th anniversary dinner on Tuesday said: “This initiative complements the national efforts to foster the growth and vibrancy of the venture capital ecosystem in Singapore; and we also expect the VIMA will play a key role in driving the adoption of Singapore law for early-stage financing transactions as the model agreements will all provide by default that they are to be governed by Singapore law and that any disputes arising therefrom will be resolved in Singapore. ”
The VIMA incorporate Singapore law as the governing law and the Republic as the selected dispute resolution forum.
More form documents will be added to the VIMA suite and existing ones refreshed where appropriate to meet the evolving needs of the VC industry.