The Advance Subscription Agreement is commonly used in Nigeria's growing startup ecosystem as a bridge financing instrument. It allows companies to receive immediate funding while deferring valuation discussions until a later date, typically a priced equity round. This type of agreement is particularly valuable for early-stage companies seeking quick access to capital without the complexity and cost of a full equity round. Under Nigerian law, particularly CAMA 2020 and SEC regulations, the agreement must comply with specific requirements regarding share issuance and foreign investment provisions. The document typically includes detailed terms about conversion mechanics, investor rights, company obligations, and protections for both parties. It serves as a crucial tool for Nigerian companies in their early funding stages, offering flexibility while ensuring compliance with local regulatory requirements.
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1. Parties: Identification of the company and the investor(s)
2. Background: Context of the agreement and brief description of the company's business
3. Definitions: Key terms used throughout the agreement
4. Subscription: Details of the advance subscription amount and corresponding future shares
5. Qualifying Event: Definition and terms of the qualifying event triggering share issuance
6. Conversion Mechanics: Process and calculations for converting the advance subscription into shares
7. Company Representations and Warranties: Standard company warranties about its legal status, capacity, and business
8. Investor Representations and Warranties: Confirmations from the investor regarding capacity and investment understanding
9. Covenants: Ongoing obligations of the company until conversion
10. Information Rights: Investor's rights to receive company information pre-conversion
11. Termination: Circumstances under which the agreement can be terminated
12. Governing Law and Jurisdiction: Nigerian law as governing law and jurisdiction provisions
13. Notices: Process for formal communications between parties
14. General Provisions: Standard boilerplate clauses including assignment, amendments, and severability
1. Most Favored Nation: Protection ensuring investor gets best terms offered to subsequent investors - used in early-stage investments
2. Foreign Investment Provisions: Additional provisions required for foreign investors under Nigerian law
3. Tax Provisions: Specific tax treatment and withholding requirements - needed if tax implications are significant
4. Anti-Dilution Protection: Protection against dilution before conversion - used for sophisticated investors
5. Board Observer Rights: Rights to attend board meetings - used for larger investments
6. Pre-emptive Rights: Rights to participate in future fundraising - used for strategic investors
1. Company Information: Details of company registration, directors, and share capital
2. Subscription Details: Detailed breakdown of investment amount and conversion calculations
3. Cap Table: Current and projected shareholding structure
4. Disclosure Schedule: Exceptions to company warranties
5. Form of Conversion Notice: Template notice for triggering conversion
6. Key Terms of Future Funding Round: If known, key terms of anticipated qualifying funding round
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