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Preferred Stock Agreement Template for Singapore

A Preferred Stock Agreement under Singapore law is a legally binding document that establishes the terms and conditions for the issuance of preferred shares in a Singapore company. It details the special rights and privileges granted to preferred stockholders, including dividend preferences, liquidation preferences, voting rights, and conversion rights. The agreement must comply with Singapore's Companies Act and related regulations, incorporating specific provisions for corporate governance and shareholder protection under Singapore law.

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What is a Preferred Stock Agreement?

The Preferred Stock Agreement is commonly used in Singapore when companies seek to raise capital while offering investors preferential rights over ordinary shareholders. This document is particularly relevant for growth-stage companies and startups looking to attract institutional investors or venture capital firms. The agreement must conform to Singapore's legal framework, particularly the Companies Act and Securities and Futures Act, and typically includes detailed provisions on dividend rights, liquidation preferences, anti-dilution protection, and conversion mechanisms. It serves as a crucial instrument in structuring investment rounds while protecting both the company's and investors' interests.

What sections should be included in a Preferred Stock Agreement?

1. Parties: Identifies all parties to the agreement, including the company issuing preferred stock and the investor(s)

2. Background: Sets out the context of the agreement and the company's intention to issue preferred stock

3. Definitions: Defines key terms used throughout the agreement

4. Subscription Details: Number of shares, price per share, and total investment amount

5. Rights and Preferences: Details of preferential rights including dividend rights, liquidation preferences, and voting rights

6. Conversion Rights: Terms and conditions for converting preferred shares to ordinary shares

7. Anti-dilution Protection: Provisions protecting preferred stockholders from dilution

8. Transfer Restrictions: Limitations on transfer of preferred shares

9. Governing Law: Specifies Singapore law as governing law and jurisdiction

What sections are optional to include in a Preferred Stock Agreement?

1. Board Representation: Rights to appoint directors to the board - include when investors request board representation rights

2. Information Rights: Rights to receive financial and other company information - include for significant investors requiring regular company updates

3. Tag-Along Rights: Right to join in sale of shares by other shareholders - include when requested by minority investors

4. Drag-Along Rights: Right to force minority shareholders to join in sale - include when requested by majority investors

5. Pre-emptive Rights: Right to maintain percentage ownership in future fundraising - include for investors wanting protection against dilution in future rounds

What schedules should be included in a Preferred Stock Agreement?

1. Schedule 1: Share Certificate: Form of share certificate for preferred shares

2. Schedule 2: Capitalization Table: Current and post-investment capital structure

3. Schedule 3: Warranties: Company warranties and representations

4. Schedule 4: Conditions Precedent: Conditions to be satisfied before completion

5. Schedule 5: Conversion Mechanics: Detailed procedures for share conversion

6. Schedule 6: Reserved Matters: List of actions requiring preferred shareholder approval

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

Singapore

Publisher

Ƶ

Document Type

Purchase Agreement

Cost

Free to use

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