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Equity Financing Agreement Template for Hong Kong

A comprehensive legal agreement governed by Hong Kong law that documents the terms and conditions under which investors provide capital to a company in exchange for equity shares. This document outlines the investment structure, share price, investor rights, corporate governance requirements, and various protections for both the company and investors. It incorporates Hong Kong-specific regulatory requirements, including compliance with the Companies Ordinance and Securities and Futures Ordinance, while establishing the framework for capital injection, shareholder rights, and company obligations.

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What is a Equity Financing Agreement?

The Equity Financing Agreement is a crucial document used when a company seeks to raise capital by issuing new shares to investors in Hong Kong. It serves as the primary transaction document in equity investment rounds, whether for early-stage startups or established companies seeking growth capital. The agreement must comply with Hong Kong's legal framework, particularly the Companies Ordinance (Cap. 622) and Securities and Futures Ordinance (Cap. 571). It typically includes detailed provisions on share subscription, payment terms, warranties, corporate governance, shareholder rights, and investor protections. This document is essential for structuring investments ranging from seed rounds to late-stage financing, requiring careful consideration of both local regulatory requirements and international investment practices common in the Hong Kong market.

What sections should be included in a Equity Financing Agreement?

1. Parties: Identification of the company, investor(s), and any other relevant parties to the agreement

2. Background: Context of the investment, including company status and purpose of the financing

3. Definitions and Interpretation: Key terms used throughout the agreement and rules of interpretation

4. Subscription and Payment Terms: Details of shares being issued, price per share, and payment mechanics

5. Conditions Precedent: Conditions that must be satisfied before completion of the investment

6. Completion: Timing and mechanics of the closing process, including deliverables

7. Representations and Warranties: Company's and investors' statements of fact and assurances

8. Company Covenants: Ongoing obligations and commitments of the company

9. Investor Covenants: Ongoing obligations and commitments of the investors

10. Board Composition: Structure and appointment rights for the board of directors

11. Information Rights: Investors' rights to receive financial and other company information

12. Reserved Matters: Actions requiring specific investor approval

13. Termination: Circumstances under which the agreement can be terminated

14. Confidentiality: Obligations regarding confidential information

15. General Provisions: Standard boilerplate clauses including governing law, notices, and amendments

What sections are optional to include in a Equity Financing Agreement?

1. Anti-dilution Protection: Provisions protecting investors from dilution in future funding rounds

2. Tag-Along Rights: Rights of investors to join in sale of shares by other shareholders

3. Drag-Along Rights: Rights to force minority shareholders to join in sale of the company

4. Pre-emptive Rights: Rights of first refusal on future share issuances

5. Registration Rights: Rights related to future public offering registration (if international investors involved)

6. Employee Share Option Pool: Provisions regarding employee share schemes

7. Founder Commitments: Specific obligations and restrictions on founders

8. Exit Provisions: Specific terms regarding company sale or IPO

9. Dispute Resolution: Specific arbitration or mediation procedures

What schedules should be included in a Equity Financing Agreement?

1. Schedule 1: Share Capital and Shareholding Structure: Details of existing and post-investment share capital structure

2. Schedule 2: Conditions Precedent Documents: List of required documents and conditions for completion

3. Schedule 3: Warranties: Detailed company and business warranties

4. Schedule 4: Reserved Matters: Detailed list of matters requiring investor consent

5. Schedule 5: Completion Obligations: Detailed list of completion deliverables and actions

6. Schedule 6: Key Terms of Employment: Key terms of employment for senior management

7. Schedule 7: Constitutional Documents: Form of new articles of association or amendments

8. Appendix A: Disclosure Letter: Company's exceptions to warranties

9. Appendix B: Financial Statements: Recent financial statements of the company

10. Appendix C: Business Plan: Company's business plan and financial projections

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Hong Kong

Publisher

Ƶ

Document Type

Financing Agreement

Cost

Free to use

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