A venture capital investment is a partnership between an investor and a growing company. To create a productive relationship that supports a fast-growing business, the partnership must be good for both the entrepreneur and the venture capitalist. In order to ensure the fairness of the agreement and to promote the interests of both parties, pay particular attention to the appointment sheet and the evaluation of your company. Each year, the venture capital industry completes thousands of funding cycles that attract a lot of time and effort from investors, management teams and lawyers. Conservatively, the sector spends about $200 million a year on direct legal fees to complete private funding cycles. In a situation that is too typical, lawyers begin with documents from recent funding, iterative to adapt the documents to their common point of view to appropriate language (which reflects the specifics of the agreement and the general best practices of the industry), and all parties examine many revisions dressed in black, in the hope of avoiding important questions, as the documents slowly arrive at their final form. Take, for example, the standard shareholder contract, which defines the conditions that govern the rights and obligations of investors and founders as shareholders of the company. Certain provisions of the shareholders` pact relating to the rights of “Series A shares” should be taken into account in the company`s bylaws under the Corporations Act. In addition, it is customary to include certain provisions (which may also be included in the shareholders` pact) in the incorporation of companies, which is due to the fact that the Constitution requires a shareholder, whether or not he is a party to a separate agreement, and that remedies in the event of a violation of the Constitution may go beyond contractual remedies (which, as a rule, , are damages). In deciding whether to include it in the Constitution (beyond those prescribed by law), it should be considered whether it will be available to the public through CARA, while the shareholders` pact is subject to confidentiality obligations. In other words, the risk industry undergoes an expensive and inefficient process of “reinventing the disc tire” every day.
The provision of a range of industry-wide standard documents, which can be used in venture capital financing, unlocks the time and cost of funding and, as a result, frees up the client`s time to review hundreds of pages of unknown documents, so that the parties can focus on high-level issues focused on the compromises of the agreement. According to the SVCA, venture capital investment in Southeast Asia was $2.7 billion in 2017 and $3.2 billion in the first 8 months of 2018. A subscription contract contains the details of the purchase price for the sale of your company`s shares. It also includes the representation and guarantees that each party will make between them as part of the agreement. (Learn more about subscription agreements.) The type of investment (equity bonds or convertible bonds): convertible bonds are a hybrid type of investment. The contract starts as a debt and turns into a share purchase when the money is not repaid. In general, both parties expect the debt to turn into shares on an agreed date. A regular stock purchase is a transaction where an investor buys a certain number of shares in a business at a pre-defined price. Model agreements can be downloaded from the CSA and SVCA website (click here to access the Singapore Law Watch and svca website).