The Safe Equity Agreement is designed for early-stage companies in New Zealand seeking to raise capital without immediately setting a company valuation or issuing shares. This agreement type has gained popularity as an alternative to convertible notes, offering a more straightforward mechanism for future equity conversion. The document includes essential provisions for investment terms, conversion mechanisms, and investor rights, all structured to comply with New Zealand's regulatory framework, particularly the Financial Markets Conduct Act 2013 and Companies Act 1993. It's particularly useful for startup companies conducting seed rounds or bridge financing, where traditional equity rounds might be premature or impractical. The Safe Equity Agreement provides investors with the right to future shares while giving companies the flexibility to defer valuation discussions until a larger funding round.
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1. Parties: Identifies the company and the investor as parties to the agreement
2. Background: Sets out the context of the agreement, including the company's intention to raise capital and the investor's desire to invest
3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation rules
4. Investment Amount: Specifies the amount being invested and payment terms
5. Conversion Events: Details the circumstances that trigger conversion of the investment into equity
6. Conversion Mechanics: Explains how the conversion will be calculated and implemented
7. Company Representations: Company's warranties and representations regarding its status and authority
8. Investor Representations: Investor's warranties and representations regarding their status and authority
9. Information Rights: Specifies what company information the investor is entitled to receive
10. Assignment and Transfer: Rules regarding transfer of rights under the agreement
11. Termination: Circumstances under which the agreement can be terminated
12. General Provisions: Standard contractual provisions including notices, amendments, governing law, etc.
1. Most Favored Nation: Optional provision ensuring investor gets the benefit of better terms offered to future investors, typically included for sophisticated investors
2. Pro-rata Rights: Gives investor right to participate in future funding rounds, included when specifically negotiated
3. Board Observer Rights: Grants investor right to observe board meetings, typically for larger investments
4. Participation Rights: Rights of investor to participate in certain corporate transactions, included for strategic investors
5. Confidentiality: Detailed confidentiality provisions, included when not covered by separate NDA
6. Dispute Resolution: Specific dispute resolution procedures, included when standard court jurisdiction is not preferred
1. Schedule 1: Capitalization Table: Current capital structure of the company including all share classes and option pools
2. Schedule 2: Conversion Calculations: Detailed examples and formulas for calculating conversion prices and share allocation
3. Schedule 3: Form of Conversion Notice: Template notice to be used when triggering conversion
4. Schedule 4: Company Details: Detailed company information including registration numbers, registered office, and directors
5. Appendix A: Investment Terms Summary: Summary of key commercial terms for quick reference
6. Appendix B: Disclosure Schedule: Company disclosures against representations and warranties if required
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Safe Equity Agreement
A New Zealand-compliant Simple Agreement for Future Equity (SAFE) that provides rights to future company equity in exchange for current investment.
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