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Standby Equity Purchase Agreement for Hong Kong

Standby Equity Purchase Agreement Template for Hong Kong

A comprehensive agreement governed by Hong Kong law that establishes a flexible financing arrangement whereby an investor commits to purchase newly issued shares from a listed company on a standby basis. The agreement sets out the terms and conditions for such purchases, including pricing mechanisms, drawdown procedures, and regulatory compliance requirements under Hong Kong securities laws and listing rules. It provides companies with an alternative funding source while giving investors the opportunity to acquire equity stakes under predetermined conditions.

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What is a Standby Equity Purchase Agreement?

The Standby Equity Purchase Agreement (SEPA) is a sophisticated financing instrument used in the Hong Kong market when a listed company seeks to establish a flexible funding arrangement with an institutional investor. It provides the company with the right, but not the obligation, to issue new shares to the investor over a specified period, subject to agreed terms and conditions. This type of agreement is particularly valuable for companies requiring periodic access to capital without the immediate dilution of a traditional placement. The document must comply with Hong Kong securities regulations, listing rules, and corporate laws, including requirements from the Securities and Futures Commission and the Hong Kong Stock Exchange. It typically includes detailed provisions on pricing mechanisms, drawdown procedures, regulatory compliance, and investor protections.

What sections should be included in a Standby Equity Purchase Agreement?

1. Parties: Identification of the Company (issuer) and the Investor (purchaser)

2. Background: Context of the agreement, including company status, listing details, and purpose of the arrangement

3. Definitions and Interpretation: Definitions of key terms and interpretation rules

4. Purchase Commitment: Core terms of the standby purchase commitment, including maximum commitment amount

5. Drawdown Mechanics: Procedures for issuing drawdown notices and completing purchases

6. Pricing Mechanism: Formula and procedures for determining the purchase price of shares

7. Conditions Precedent: Conditions that must be satisfied before purchases can occur

8. Representations and Warranties: Standard and transaction-specific representations by both parties

9. Company Covenants: Ongoing obligations of the company during the agreement term

10. Investor Covenants: Ongoing obligations of the investor during the agreement term

11. Compliance Requirements: Regulatory compliance obligations, including disclosure requirements

12. Term and Termination: Duration of agreement and termination rights

13. Events of Default: Circumstances constituting default and consequences

14. Confidentiality: Confidentiality obligations and permitted disclosures

15. Notices: Communication procedures between parties

16. General Provisions: Standard boilerplate provisions including governing law, jurisdiction, amendments

What sections are optional to include in a Standby Equity Purchase Agreement?

1. Security Arrangements: Required if any security is provided for the purchase commitment

2. Registration Rights: Include if the investor requires specific rights to register shares for resale

3. Board Rights: Include if the investor is granted board representation or observer rights

4. Anti-dilution Protection: Include if the investor requires protection against dilution

5. Placement Agent Provisions: Required if a placement agent is involved in the transaction

6. Lock-up Provisions: Include if there are restrictions on share transfers or sales

7. Most Favored Nation Clause: Include if the investor requires protection against better terms being offered to others

8. Force Majeure: Optional expanded provisions for extraordinary events affecting performance

What schedules should be included in a Standby Equity Purchase Agreement?

1. Form of Drawdown Notice: Template for company to request share purchases

2. Pricing Calculation Examples: Detailed examples of how share price will be calculated

3. Conditions Precedent Documents: List of required documents and certificates

4. Company Information: Detailed company information including capital structure

5. Form of Compliance Certificate: Template for periodic compliance certification

6. Disclosure Schedule: Exceptions to representations and warranties

7. Required Regulatory Approvals: List of necessary regulatory approvals and status

8. Form of Legal Opinions: Required format for legal opinions

Authors

Alex Denne

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

Jurisdiction

Hong Kong

Publisher

Ƶ

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions




















































Clauses






























Relevant Industries

Financial Services

Investment Banking

Securities Trading

Private Equity

Asset Management

Corporate Finance

Legal Services

Listed Companies (All Sectors)

Investment Management

Professional Services

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Compliance

Risk Management

Company Secretarial

Board of Directors

Investment Committee

Corporate Finance

Investor Relations

Relevant Roles

Chief Executive Officer

Chief Financial Officer

General Counsel

Corporate Finance Director

Investment Director

Compliance Officer

Company Secretary

Financial Controller

Investment Manager

Legal Counsel

Corporate Development Director

Treasury Manager

Risk Manager

Board Director

Investment Committee Member

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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