The Simple Agreement for Future Equity (SAFE) is designed for early-stage companies in Hong Kong seeking to raise capital without immediately setting a company valuation or issuing equity. This instrument, while maintaining compliance with Hong Kong's Companies Ordinance and Securities and Futures Ordinance, provides a streamlined alternative to convertible notes. It's particularly useful when companies need quick access to capital without the complexity of priced equity rounds or the debt obligations of convertible notes. The document includes essential provisions for investment amount, conversion mechanics, company representations, and investor rights, all structured within Hong Kong's legal framework. The SAFE has become increasingly popular in Hong Kong's startup ecosystem, especially among technology and high-growth companies, as it offers flexibility while protecting both investor and company interests.
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1. Parties: Identifies the company and the investor as parties to the agreement
2. Background: Explains the context: company seeking investment and investor willing to invest in exchange for future equity rights
3. Definitions: Defines key terms including Discount Rate, Valuation Cap, Qualifying Financing, Liquidity Event, and other relevant terms
4. Investment Amount: Specifies the investment amount and payment terms
5. Future Equity Rights: Details when and how the investment converts to equity, including conversion mechanics and calculation methods
6. Conversion Mechanics: Specifies triggers for conversion including qualifying financing, liquidity events, and dissolution events
7. Company Representations: Standard company representations about authority, organization, and power to enter agreement
8. Investor Representations: Standard investor representations about investment intent and sophistication
9. Information Rights: Basic information rights granted to the investor
10. Assignment and Transfer: Terms governing the transfer of rights under the agreement
11. Governing Law and Jurisdiction: Specifies Hong Kong law as governing law and Hong Kong courts' jurisdiction
12. General Provisions: Standard boilerplate provisions including notices, amendments, and counterparts
1. Most Favored Nation: Optional provision ensuring investor gets best terms if company issues better terms in subsequent SAFEs
2. Pro-rata Rights: Optional right for investor to participate in future financing rounds
3. Board Observer Rights: Optional provision granting investor right to observe board meetings if investment exceeds certain threshold
4. Confidentiality: Optional detailed confidentiality provisions if not covered in general provisions
5. Dispute Resolution: Optional detailed arbitration or mediation procedures if preferred over standard court jurisdiction
1. Schedule 1 - Conversion Calculations: Detailed examples and formulas for calculating conversion price and number of shares
2. Schedule 2 - Cap Table: Current cap table of the company showing existing shareholding structure
3. Schedule 3 - Company Information: Key company details including registration number, registered address, and directors
4. Appendix A - Form of Shareholders Agreement: Form of shareholders agreement to be entered into upon conversion
5. Appendix B - Deed of Adherence: Form of deed to be executed upon conversion to adhere to shareholders agreement
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