Standby Equity Purchase Agreement Template for Australia

A Standby Equity Purchase Agreement (SEPA) is a sophisticated financing instrument that provides your company with committed capital access while offering maximum flexibility over timing and amount. Under Australian law, this agreement creates a binding commitment from an investor to purchase shares when you choose to issue them, giving you financial security without immediate dilution of existing shareholdings.

When do you need this document?

You typically need a SEPA when your company requires reliable access to capital but wants to avoid the immediate dilution and market timing risks associated with traditional equity raises. This is particularly valuable for ASX-listed companies during volatile market conditions, when planning major acquisitions, or when funding research and development projects with uncertain timelines. The agreement is also essential when your company needs to demonstrate financial backing to potential partners, customers, or regulators, as the committed capital provides credibility and stability. Growth companies often use SEPAs to bridge funding gaps between major financing rounds or to provide backup liquidity during expansion phases.

Key legal considerations

The agreement must carefully balance your company's need for flexible capital access with the investor's requirement for fair pricing and risk protection. Critical clauses include the commitment amount, draw-down mechanics, share pricing formulas typically tied to market prices, and conditions precedent for each issuance. You must address potential conflicts with existing shareholders' pre-emptive rights and ensure compliance with continuous disclosure obligations. The agreement should specify termination events, investor warranties, and your company's ongoing obligations during the commitment period. Careful drafting of pricing mechanisms is essential to prevent disputes, often incorporating volume-weighted average price calculations with appropriate discounts to reflect market risk and liquidity provisions.

Legal requirements in Australia

Your SEPA must comply with the Corporations Act 2001, particularly sections relating to share issuance, directors' duties, and corporate governance. If your company is ASX-listed, the agreement must align with ASX Listing Rules regarding equity issuances, disclosure requirements, and shareholder approval thresholds. You must consider whether the arrangement requires shareholder approval under the 15% placement capacity rules or if it falls within other exceptions. ASIC regulations may apply if the investor provides financial services, requiring appropriate licensing and conduct obligations. The agreement must address anti-money laundering requirements and ensure proper documentation of the investor's identity and source of funds. Continuous disclosure obligations mean you must announce the agreement to the market promptly and provide updates on any material changes or draw-downs that occur during the commitment period.