Standby Equity Purchase Agreement Template for Singapore

A Standby Equity Purchase Agreement (SEPA) is a strategic financing arrangement that gives your Singapore company flexible access to equity capital without immediate dilution of your shareholding. Under this agreement, an investor commits to purchasing shares from your company when you issue a draw down notice, providing you with a reliable funding source that you can activate as needed.

When do you need this document?

You need a SEPA when your company requires a flexible capital raising mechanism that doesn't force immediate equity dilution. This agreement is particularly valuable for growth companies that anticipate future funding needs but want to maintain control over the timing of capital raises. Listed companies on the Singapore Exchange often use SEPAs to complement their funding strategy, while private companies use them to secure committed capital for expansion plans, working capital needs, or strategic opportunities. The agreement is also useful when you want to avoid the uncertainty and costs associated with traditional equity fundraising rounds.

Key legal considerations

Your SEPA must clearly define the commitment amount, draw down mechanics, and pricing formula to avoid disputes. The pricing mechanism typically includes a discount to market price to compensate the investor for their commitment. You need to carefully structure conditions precedent for draw downs, including minimum notice periods and maximum draw down amounts per period. Directors' duties under the Companies Act require you to ensure the agreement serves the company's best interests and doesn't prejudice existing shareholders. The agreement should include representations and warranties from both parties, termination clauses, and dispute resolution mechanisms. Consider including material adverse change provisions that may suspend the investor's commitment obligations.

Legal requirements in Singapore

Under the Securities and Futures Act, your SEPA may trigger disclosure obligations if it involves listed securities or constitutes a substantial shareholding. You must comply with the Companies Act's share issuance provisions, including board resolutions and, where required, shareholder approvals for share issues. MAS guidelines may apply if the transaction involves regulated activities or if your company operates in a regulated sector. Listed companies must ensure compliance with SGX Listing Rules, including continuous disclosure obligations and shareholder approval requirements for significant transactions. The agreement must specify that shares will be issued in accordance with your company's constitution and applicable laws. Directors must consider their fiduciary duties and the Code of Corporate Governance when approving the SEPA structure and terms.