An updated and enhanced version of the Venture Capital Investment Model Agreements (VIMA) suite of model documents for early-stage venture capital (VC) transactions is now available to help start-ups in their early rounds of fundraising in Southeast Asia.

The VIMA Initiative

The VIMA initiative was first introduced in 2018 by the Singapore Academy of Law (SAL) and the Singapore Venture & Private Capital Association (SVCA) to, among other things, help boost the appeal of Singapore as a regional hub for start-ups and VC investments.

The VIMA suite served as a useful resource for lawyers, start-up founders, and investors in preparing the necessary transaction documents for seed-funding rounds. It enables parties to negotiate with a common understanding of the general structure of the definitive agreements, which saves time, costs, and allows the parties to focus their efforts on negotiating deal‑specific legal and commercial terms.

VIMA 2.0

The latest update, termed VIMA 2.0, represents a significant upgrade to the initial VIMA model agreements in response to the rapid growth in Southeast Asia's start-up and VC ecosystem, which has increased even further the focus on standard VC industry investment terms and best practices. According to data analytics company Preqin, (VC) investments in Southeast Asia grew  1.6 times  to hit a record US$20.4 billion in 2021.

Led by SAL and SVCA, the VIMA 2.0 initiative was supported pro bono by a working group comprising law firms – including Morrison Foerster – investors, and start-ups, and incorporated feedback from an extensive industry consultation.

VIMA 2.0 is specifically designed to provide model contracts tailored to a start-up's early days.

  • Series A Set:  The Series A set has been refined and improved to reflect market developments and changes since 2018. For example, given the increased popularity of short-term bridging rounds, VIMA 2.0 introduces a model convertible note agreement, as this tends to be the instrument of choice for such bridging rounds. Similarly, a model constitution corresponding to the VIMA shareholders and subscription documents has been introduced for easy adoption by users.
  • Pre-Series A Set: A separate set of pre-Series A documents has been created to facilitate and support a start-up's journey towards its first fundraising. The pre‑Series A set provides basic documents to address some of the key founder and company establishment issues, with the intention that as the business grows, these documents may be superseded by the more complex and sophisticated arrangements in the VIMA Series A suite.
  • ESG Letter Agreements: Investors have been making, and will increasingly be making, commitments around ESG to their investors and stakeholders. There is currently no standard set of terms in the market for the documentation of ESG‑related obligations. VIMA 2.0 introduces a groundbreaking model ESG letter agreement to provide a reference for incorporating ESG-related provisions in a share or convertible note financing of a Singapore company. Short-form and long-form versions of the model ESG letter agreement are available. Early‑stage companies may use the short-form letter agreement, while later‑stage growth or matured companies may use the long-form version.

Morrison Foerster made significant contributions to the model ESG letter agreements and the model convertible note agreement. Morrison Foerster Singapore partner Lip Kian Ang commented, “We are grateful for the robust and thoughtful exchange of ideas among the numerous like-minded and leading industry players that went into producing these groundbreaking ESG letter agreements. We are confident that they will help to catalyze the adoption of ESG‑related provisions in M&A, private equity, and venture capital investment transactions and, more generally, aid purchasers, investors, and companies alike in their respective ESG journeys.”

Complete List of VIMA 2.0 Model Documents

New Documents:

  • Convertible Note: This sets out the terms and conditions pursuant to which an investor will purchase a convertible note issued by a private company limited by shares incorporated in Singapore and is typically issued by a company as a bridging facility before a subsequent financing round.
  • Environmental, Social, and/or Governance Letter Agreement: This sets out some examples of how ESG-related provisions can be incorporated in an investment by way of a share financing or convertible note financing in a Singapore company.
  • Model Constitution:  The model constitution has been prepared for reference only to show how the constitution of a Singapore private company limited by shares might look like after it has been amended in connection with a Series A funding round.
  • Employee Share Option Plan Primer: An article that sets out a high level overview of certain types of employee incentive plans commonly used among start-ups in Singapore, and the key factors to consider in designing and implementing such plans.
  • Employee Share Option Plan Schedule: This schedule sets out key terms on share or option grants for an employee, advisor, director, consultant, or contractor for a start-up business that does not yet have an employee incentive plan in place.
  • Mutual Non-Disclosure Agreement: This governs confidential information shared by a company with its third-party vendor or supplier and vice versa.
  • Founders' Agreement: This sets out the key terms and conditions regulating the affairs of the company and the rights and obligations of the founders as shareholders of the company inter se, prior to any financing from third-party sources.
  • Intellectual Property Assignment Clauses: This schedule sets out key terms on intellectual property created by a founder to inject the same into a start-up business.

Updated Documents:

  • Shareholders' Agreement: This sets out the key terms and conditions regulating the affairs of the company and the rights and obligations of the investors and founders as shareholders of the company.
  • Subscription Agreement:  This sets out the terms and conditions pursuant to which an investor (or group of investors) will subscribe for shares in a company.
  • Term Sheet: This sets out the key terms and conditions pursuant to which an investor (or group of investors) will subscribe for shares in a company. It is generally non-binding, and the relevant parties must then enter into binding agreements to give effect to its terms.
  • CARE Agreement: This agreement is used in seed or Pre-Series A financing rounds and provides a flexible and simple way for fundraising to take place.
  • Non-Disclosure Agreement: This governs confidential information shared by a company with its investor.
  • Venture Capital Lexicon: This only provides limited general guidance on certain basic concepts and terms relevant to the recommended forms of the VIMA 2.0.

More information on VIMA.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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