This glossary explains jargon relevant to startups operating and raising capital in Southeast Asia. For further explanation, check out our guides and videos on raising capital in the region.

Click on the term for full text.

AJAX progress indicator
  • acceleration
    a mechanism in an ESOP or ESS under which a participant’s options or shares (as applicable) partially or completely vest immediately on a triggering event. Triggering events include a liquidity event. See also single trigger acceleration and double trigger acceleration.
  • accelerator
    a mentoring program designed to speed up the growth of very early stage startups, usually over a period of 3-6 months. The services are generally offered in exchange for the issue of shares to the accelerator.
  • acqui-hire agreement
    used when a company intends to bring in employees from a target company, rather than acquiring that target's business or assets. Acqui-hires are common amongst well-funded startups looking to hire other teams. See our template acqui-hire agreement.
  • acquisition
    a transaction in which a buyer acquires another company’s shares or its business and assets. See our template M&A term sheet.
  • ACRA
    the Accounting and Corporate Regulatory Authority of Singapore, the statutory board that oversees the regulation of companies in Singapore. Many startups in Southeast Asia have their holding company incorporated in Singapore.
  • advisor share agreement
    an agreement under which a person provides advisory services to a startup in return for shares. The shares awarded to the advisor often vest over a period of time. See our template advisor share agreement.
  • affirmative vote items
    restrict the company from taking certain actions without the consent of a specified investor, or investors holding a certain percentage of a class of shares (usually a majority). Also referred to as investor veto rights or reserved matters.
  • angel investor
    an individual who invests in startups, typically at the seed investment stage.
  • anti-dilution protection
    a mechanism which adjusts downwards the conversion price of preference shares when shares are subsequently issued by a company at a lower price than the price paid by the holders of those preference shares. Anti-dilution provisions are often introduced in series A investment documentation and are almost always provided on a weighted average basis (rather than a full ratchet).
  • as-if-converted basis
    terminology often used in the context of voting rights of preference shares, and refers to the number of ordinary shares held by a holder assuming full conversion of those preference shares based on the current conversion price.
  • automatic conversion
    refers to the automatic triggers which cause preference shares to convert into ordinary shares. Typically a qualified IPO forces automatic conversion.
  • bad leaver
    an individual who has left a company in certain specified negative circumstances (for example, they are terminated for cause). Under ESOP rules, an employee who is a bad leaver may have all of their options cancelled (whether vested or unvested). Under a founder vesting agreement, a founder who is a bad leaver may forfeit shares held by way of a claw-back by the company.
  • BKPM
    Badan Koordinasia Penanaman Modal, the regulatory board which administers and approves foreign capital investment in Indonesia. Many corporate actions involving Indonesian companies require approval from BKPM.
  • board
    the board of directors of a company who are responsible for the day to day operations of the business of that company.
  • board appointment rights
    a right to appoint and remove a director to a board of directors. Investors typically want the right to appoint at least one director to represent them on the board of an investee company. This right may be subject to the investor or investors maintaining a minimum percentage of shares in the Company.
  • bridge financing
    the process of raising capital, which often takes place between closing a seed investment round and a larger series A financing.
  • broad-based
    a form of weighted average anti-dilution protection which includes in the formula both the company’s shares in issue, as well as shares which could be issued by converting all other options, rights, and securities, including employee share options. Using a broad-based weighted average results in a higher conversion price for the holders of the preference shares than with a narrow based formula, and is therefore more favourable to founders.
  • buy-back
    the repurchase of a shareholder’s shares by a company. Company buy-back transactions generally need to follow strict company law procedures.
  • buy-out
    the purchase by a third party of shares in a company.
  • cap table
    a table which records the shareholdings in a company, together with details of options and/or other convertible securities issued by the company. Typically a share subscription agreement will include cap tables setting out the position before and after closing of a fundraising transaction.
  • capital raising
    the process by which a company raises capital, generally by issuing shares or alternatively, convertible notes to investors.
  • cause
    used in the employment context but also in ESOP rules or related to founder vesting. Cause typically describes scenarios where a founder or employee is terminated on grounds of misconduct or breach of certain obligations. This may include a material breach of their employment agreement, breaching a non-compete or being convicted of a criminal offence. Being terminated for cause normally results in an individual being considered as a bad leaver.
  • Civil and Commercial Code (Thailand)

    the primary source of corporate and commercial law in Thailand.

  • claw-back
    the right for a company to buy-back shares from a shareholder in certain circumstances at a specified price. Often, unvested shares of a founder that has left the business before the end of his or her vesting period can be clawed back at the option of the company under a founder vesting agreement.
  • closing
    the satisfaction of key obligations in an agreement (e.g. payment of an investment amount, delivery of share certificates, etc.).  Often, the closing date is set as the date on which the agreement’s conditions precedent are satisfied or waived, or within a few days afterwards.
  • closing opinion
    an opinion occasionally provided at the request of investors on closing of a fundraising transaction. Such opinion typically covers the due incorporation of the investee company and the enforceability of the transaction documents.
  • co-sale rights
    the right of certain shareholders to require a buyer of another shareholder's shares to also purchase an equivalent percentage of their shares on the same terms. Investors often have the benefit of co-sale rights which are triggered if founders wish to sell some or all of their shares in a company.
  • common stock
    US terminology that is sometimes seen in term sheets in Southeast Asia and which should correctly refer to ordinary shares.
  • Companies Act 1967 (Cap. 50) (Singapore)
    the Act that regulates the formation, administration and governance of companies incorporated in Singapore.
  • Companies Act 2016 (Malaysia)
    the act that regulates the formation, administration and governance of companies incorporated in Malaysia.
  • Companies Commission of Malaysia
    the statutory body that oversees the regulation of businesses and companies in Malaysia.
  • completion
    satisfaction of key obligations in an agreement (e.g. payment of an investment amount, delivery of share certificates, etc.).  Often, the completion date is set as the date on which the agreement’s conditions precedent are satisfied or waived, or within a few days afterwards.
  • completion checklist
    sets out the actions a party needs to take to ensure that they have fulfilled all of their key obligations in an agreement, and in particular the conditions precedent to closing. See our template completion checklist.
  • conditions precedent
    steps and actions that need to be carried out before completion of a transaction occurs. As a minimum, the delivery of board and shareholder resolutions approving the transaction is typically a conditions precedent that must be satisfied.
  • confidential information
    information that one party has provided to another party, and that is not in the public domain. Parties to a transaction are usually bound by restrictions on the use of other parties’ confidential information from the time after signing a term sheet.
  • consideration
    in the context of a share sale transaction, monies paid to shareholders in exchange for those shareholders agreeing to transfer their shares to a buyer.
  • constitution
    the governing document which sets out the rights, powers and duties of a company, the board and each shareholder of a company.
  • conversion price
    (i) in the context of a convertible note, the price per share that an investor will have to pay to convert their investment amount into shares. Normally this is calculated based on the lower of a valuation cap, and the share price of the next financing round less a discount. (ii) in the context of rights attaching to shares, the price that is applied on conversion of preference shares into ordinary shares. Initially this is based on the subscription price paid for the preference shares, but can be adjusted downwards due to anti-dilution protection.
  • conversion rights
    in the context of shares, the right to convert preference shares into ordinary shares. Conversion rights generally fall into two categories: (i) optional conversion, and (ii) automatic conversion.
  • convertible note
    an agreement under which an investor advances money to a company on the condition that the investment amount will convert into shares when certain events occur. A KISS is a form of convertible note. See our template KISS convertible note.
  • corporate authorisations
    the directors’ and shareholders’ resolutions, waivers and any consents required to approve the entry into a corporate transaction. Often required as part of the conditions precedent to be satisfied.
  • corporate transaction payment
    a term used in the original US version of the KISS to refer to an amount payable to holders of a KISS if the company undergoes a liquidity event before conversion of the KISS.
  • crowd funding
    the practice of funding a project or business by raising small amounts of money from a large number of people, typically via online platform.
  • cumulative dividends
    dividends that roll over on an annual basis if they are not paid. This can result in significant payments being made to investors on a liquidity event (reducing payments to founders). Contrast with non-cumulative dividends which are more commonly seen startups in Southeast Asia.
  • Data Privacy Act of 2012 (Philippines)

    the legislation governing data protection in the Philippines which came into force on 8 September 2012.

  • data room

    a physical, or more commonly a virtual, data room, used for storing company documentation presented to investors or a buyer as part of a transaction.

  • de-minimis
    in the context of limitations on liability under transaction documents, the minimum single claim amount before any amounts can be recovered from warrantors for a claim for breach of warranty.
  • debt financing
    a form of fundraising involving the issue of a debt instrument by a company to investors. Most commonly for startups, this would be done via a convertible note.
  • deed of accession or deed of adherence
    a document under which new parties agree to be bound by the terms of an existing agreement (such as a shareholders’ agreement).
  • deed of assignment of intellectual property
    a document which formally transfers the ownership of one party’s intellectual property to another party. Investors in, or purchasers of, a company will often require such deeds executed by founders, employees, and contractors evidencing that the company owns all of the intellectual property required to operate its business.
  • default rights
    the right of an investor to certain remedies if a company breaches provisions of an agreement (often including breaches of the warranties provided under a share subscription agreement).
  • deferred consideration
    consideration which is not paid to a seller on completion but after a period of time and which sometimes is conditional upon performance of a company under an earnout.
  • dilution
    the reduction in a shareholder’s proportionate ownership of shares in a company when new shares are issued.
  • disclosure letter
    a letter which sets out a company’s general disclosures and specific disclosures as exceptions to the representations and warranties given in a share subscription agreement or SPA.
  • discount
    in the context of a convertible note, the discount applied to the price per share at which the investment amount converts into shares if a qualifying equity financing occurs. This discount rewards the investor for the risk taken in investing so early in the company. In Southeast Asia, the discount is typically in the range of 15-25% less than the share price paid by incoming investors on the financing round.
  • dispute resolution provision
    a provision which sets out rules as to how parties should proceed if there is a dispute under a legal agreement. In Southeast Asia, many dispute resolution clauses in investment and sale documentation require disputes to be resolved by SIAC.
  • distribution

    a payment made to shareholders from a company, which can include cash as well as liabilities incurred by the company on behalf of the shareholders.

  • D&O insurance
    directors’ and officers’ insurance which protects the company and its personnel against liability arising from actions taken by directors and officers on the company’s behalf. Commonly required by investors on series A deals.
  • double trigger acceleration
    a mechanism in an ESOP under which a percentage of unvested options immediately vest (i.e. accelerate) on an exit, where the vesting of the unvested options is conditional on a second event occurring. The second event is typically an employee being terminated, or that employee resigning with good reason within a certain time period after the exit event. Whilst commonly adopted in US investment documents, double trigger acceleration is less commonly used in ESOPs for Southeast Asia startups.
  • down round
    an investment round under which new shares are issued at a price that is lower than the price paid by investors in earlier fundraising rounds.
  • drag along rights
    rights which enable shareholders holding a specified majority of shares to force the minority shareholders to sell their shares in a company to a third-party buyer. Sometimes drag-along rights can only be triggered if a majority of the holders of preference shares also approve such a transaction and/or if the exit valuation is higher than an agreed amount.
  • drawdown date
    in the context of a convertible note, the date on which the investor advances the investment amount to a company.
  • due diligence
    investigations undertaken by an investor or buyer prior to investing in, or purchasing, a company or business. Commonly includes enquiries into the company's or business' legal, commercial, financial, technological, and tax affairs.
  • earnout
    an arrangement included in a sale transaction whereby the seller of a company or business will recieve additional payments conditional upon performance of the target company or business.
  • EIT Law (Indonesia)
    Electronic Information and Transactions Law (Law No. 11 of 2008), the law regulating data protection in Indonesia, which is implemented by Reg 82 and the MOCI Regulations.
  • Enterprise Singapore
    formed in April 2018 through the merger of IE Singapore and SPRING Singapore, the statutory board that focuses on enterprise development and growing Singapore as a trade and startup hub.
  • equity

    ownership in a company, generally represented by holding shares.

  • equity financing
    a form of fundraising involving the issue of shares to investors.
  • EROM
    the electronic register of members of a company registered in Singapore, which is maintained by ACRA.
  • ESOP
    employee share option plan, a scheme under which a company grants employees, directors, and contractors options to purchase shares in the company which typically vest over a period of time.
  • ESOP pool
    the maximum number of options that can be granted under an ESOP.  A pool that is approximately 10-15% of the company’s total shareholding on a fully diluted basis is common.
  • ESOP rules
    a document that sets out the rules that apply to options granted under an ESOP such as the process for granting options, how employees can exercise vested options (see also exercise price and exercise notice), and what happens to those options if an exit happens or an employee leaves.
  • ESS
    an employee share scheme, a scheme under which a company issues shares to employees which vest over a period of time. Unlike an ESOP, shares in the company (rather than options over shares) are issued to participants of the scheme, but the company has an option to claw-back unvested shares in certain circumstances.
  • exclusivity
    in a term sheet, a period of time during which the company cannot seek investment or sale offers from other parties whilst the potential investor or buyer (as applicable) negotiates the investment documents and completes its due diligence enquiries.
  • exercise notice
    under an ESOP, the notice an option holder must deliver to the company in order to exercise their vested options and be issued shares in that company.
  • exercise price
    the price an option holder has to pay to exercise their options. It is often set at the market price of a share at the date of the option grant.
  • exit or exit event
    a transaction where a third party acquires the majority of shares or assets of a company.
  • exit rights
    remedies (sometimes involving a forced buy-back or redemption of shares) provided to investors if the company does not achieve an exit within a stated period of time. In Southeast Asia, exit rights tend not to be requested by investors until at least series A and then are between 5 and 7 years from closing of the particular transaction.
  • expiry date
    under an ESOP, the date by which an option must be exercised. In Southeast Asia, this is usually set as 7 to 10 years after the date of the option grant, to allow sufficient time for an exit to occur.
  • flipping

    the process of re-domiciling a company in a country different to its place of first incorporation. This can be done by way of share transfer and interposing a new holding company, or alternatively by way of a transfer of assets.

  • Foreign Corrupt Practices Act 1977 (FCPA) (US)

    the Act which sets out US anti-corruption laws. It is typical for investors in Southeast Asia to seek warranties and undertakings from startups as to compliance with FCPA standards, even if the business has no connection to the US.

  • founder
    an individual who plays a significant part in establishing a startup and is key to its success. Founders typically are directors and initially own the majority of the company’s shares.
  • founder lock-in
    a clause which restricts a founder from selling shares for a period of time (often 3 or 4 years) without investor consent.  It is usual for investors to request such a provision in a shareholders’ agreement when negotiating an investment transaction.
  • founder vesting
    an arrangement, documented in a founder vesting agreement, under which a company has the right to claw-back a founder’s shares if that founder ceases to work for the company (or in some cases fails to make the contribution required of them to the business) during an agreed vesting period.
  • founder vesting agreement
    an agreement which covers founder vesting and typically provides for progressive vesting of shares over a period (e.g. 36 months). See our template founder vesting agreement.
  • full ratchet
    anti-dilution protection which provides that where shares in the future are issued at a lower price than what an investor paid for its preferential shares, the investor is either issued new shares to reflect the same share price, or the conversion price for the preferential shares is adjusted down to the lower price. Full ratchet anti-dilution rights can be very harsh on the holders of ordinary shares.
  • fully and fairly
    a common standard adopted for the disclosure of documents, whereby information must be disclosed such that an investor can sufficiently understand the details of the documents and underlying information.
  • fully diluted
    a representation of a company’s shareholdings where all possible conversion rights (e.g. from convertible notes, warrantsoptionspreference shares) have been fully exercised.
  • fundraising
    the process by which a company raises capital, generally by issuing shares or convertible notes to investors.
  • general disclosures
    matters deemed to be disclosed to investors, which could include a company’s accounts, searches of public registers, and the contents of a data room which has been made available to investors or a buyer.
  • good leaver
    an individual who has left a company in circumstances where he or she is not considered as a bad leaver under the relevant agreement. Good leavers will typically lose their unvested shares or options but retain vested shares or options.
  • good reason
    under an ESOP, circumstances in which an employee resigns or has their employment terminated, but is still considered a good leaver under the arrangement.
  • governance
    rules and principles that a company must follow which are primarily derived from the relevant statute that regulates companies in the country of the company’s incorporation, the company’s constitution and any shareholders’ agreement in place.
  • ICO
    an initial coin offering, a form of fundraising where a company sells newly created cryptocurrency to investors in order to raise funds.
  • incubator
    similar to an accelerator, an organisation or program which provides financial and mentoring support to startups.
  • indemnity
    a clause under which one party agrees to bear another party’s losses or damages on a dollar-for-dollar full reimbursement basis. Indemnities can be a remedy for a breach of warranties and/or separately cover specific risks identified.
  • independent contractor agreement
    sets out the relationship between a company and a party engaged to provide specified services to the business. Independent contractor agreements typically set out the terms of remuneration and provide that all IP created by the contractor is assigned to the company. See our template independent contractor agreement.
  • Indonesian Law No. 25 of 2007) (Indonesia)

    the law which regulates foreign investment activities in Indonesia in all sectors and can be relevant for startups who operate with a Singapore holding company.

  • Indonesian Law No. 40 of 2007) (Indonesia)

    the law which regulates the procedures, terms and conditions regarding the establishment and the management of a company in Indonesia.

  • interest rate
    in the context of a convertible note, the rate at which interest accrues until the investment amount has been converted into shares under the terms of the note. Interest is generally rolled up on conversion of the note into shares in the company.
  • Investment Coordinating Board (Indonesia)
    Badan Koordinasia Penanaman Modal, the regulatory board which administers and approves foreign capital investment in Indonesia. Many corporate actions involving Indonesian companies require approval from BKPM.
  • investor director
    a director nominated by an investor to be on a company’s board of directors. In fundraising deals in Southeast Asia, investors will often seek a board appointment right as a condition to investing.
  • investor veto rights
    restrictions on a company from taking certain actions without the consent of a particular investor, or investors holding a certain percentage of a class of shares (usually a majority). Also referred to as affirmative vote items or reserved matters.
  • IP assignment
    the process by which IP is transferred to the company from founders, employees or third parties that have developed. See our template IP assignment.
  • IP or intellectual property
    rights over creations of the mind, and includes copyright, trade marks, patents, and registered designs. IP clauses in the commercial contracts of tech companies are key and should set out the ownership position between parties (i.e. that each party owns their IP that existed prior to the contract, and IP that was not developed in the course of that particular contract).
  • IPO
    an initial public offering, a form of fundraising in which a company offers some or all of its shares to the public as part of an application for its securities to be admitted to trading.
  • joint and several liability
    in the context of representations and warranties, a standard of liability which enables investors to bring a claim against any one or more of the warrantors for the full amount of the claim.
  • KISS
    the Keep-It-Simple-Security a short form convertible note released online by the US accelerator 500Startups in 2014 and which is adapted and used by startups across Southeast Asia when completing a seed investment. The investment amount converts on a qualifying equity financingexit, or on the maturity date, and typically acrues interest. See our template KISS convertible note.
  • Law on Enterprises 1999 (Vietnam)

    the act which regulates companies, partnerships and private enterprises in Vietnam.

  • Law on Investment 2014 (Vietnam)

    the act which regulates investment activities in Vietnam and can be relevant for startups who operate with a Singapore holding company.

  • lead investor
    typically the investor who invests the largest amount on a fundraising. Lead investors often receive additional rights above those granted to the other investors in the round.
  • letter of grant
    a letter issued to employees being granted options under an ESOP, the form of which is generally set out as a schedule to ESOP Rules.
  • limitations on liability
    in the context of a share subscription agreement or an SPA, provisions that limit the liability of warrantors. They can include financial caps on liability and time periods for investors to bring claims.
  • liquidation preference
    the right, on a liquidity event, for holders of preference shares to receive a specified amount of the proceeds in priority to the holders of ordinary shares.
  • liquidation preference amount
    the amount to be received by the holders of preference shares in priority to the holders of ordinary shares. This preferential amount could be equal to the investment amount or possibly a multiple of it (e.g 1.5x or 2x). In Southeast Asia, liquidation preference amounts are generally set at 1x the investment amount.
  • liquidation proceeds
    the proceeds of a liquidity event, which in most cases will be the proceeds received from a buyer on a sale of the company.
  • liquidity event
    a transaction where a third party acquires the majority of shares or assets of a company. Commonly includes M&A deals and amalgamations, but not generally an IPO.
  • long stop date
    a date by which an agreement’s conditions precedent have to be completed on an investment transaction otherwise one or more of the parties to the agreement may be able to terminate the agreement, this would typically be within 30 days of the subscription agreement.
  • M&A
    a merger and acquisition, i.e. a sale transaction in which the ownership of a company and/or businesses are transferred to a third party buyer.
  • major investor rights
    preferential rights sometimes given to the lead investors investing a significant amount of money in the company. Major investor rights are seen in convertible notes and in equity investments.
  • majority-in-interest
    in the context of convertible notes, describes those noteholders who invested a specified majority of the total investment amount of the particular series notes.  This concept can be used to ensure that key decisions are taken, or rights are waived on a majority rules basis – rather than by individual investors.
  • Map of the Funding Terms
    a detailed interactive tool to review typical funding terms on investment transactions in Southeast Asia created by Simmonds Stewart. See the tool here.
  • Map of the Money
    an interactive list of venture capital firms and active investors in Singapore, created by Arnaud Bonzom and Florian Cornu. See the tool here.
  • MAS
    the Monetary Authority of Singapore, the central bank of Singapore which, amongst other things, helps shape Singapore’s financial industry by promoting a strong corporate governance framework and close adherence to international accounting standards.
  • maturity date
    in the context of a convertible note, the date on which the debt converts into shares or becomes repayable in cash at the investor’s option. Usually set to be after a reasonable period of time from the note’s date (e.g. 12-24 months), so that the company has the opportunity to complete a qualifying equity financing.
  • memorandum and articles of association
    documents that previously needed to be filed in order to incorporate a company in Singapore. The Companies (Amendment) Act 2014) replaced their documents with a constitution.
  • Ministry of Law and Human Rights (Indonesia)

    (or Kemenkumham) the Ministry which oversees the incorporation of companies in Indonesia.

  • MOCI Regulation
    Minister of Communications & Informatics Regulation No. 20 of 2016 regarding the Protection of Personal Data in an Electronic System, the implementing regulation of the EIT Law in Indonesia.
  • model constitution
    The model constitution often adopted on incorporation of a Singapore company and which is set out in the Companies (Model Constitutions) Regulations 2015.
  • most favoured nation clause
    in the context of a convertible note, the right for a noteholder to exchange the note issued to it for any subsequent convertible note issued by the company on more favourable terms.
  • mutual confidentiality agreement
    an agreement under which parties agree how each party’s confidential information is to be handled.
  • narrow-based
    a form of weighted average anti-dilution mechanism which includes the company’s shares on issue (including all ordinary shares to be issued upon conversion of the preference shares) but excludes shares which could be issued by converting all other options, rights, and securities, including employee share options. Using a narrow-based weighted average formula results in a lower conversion price for the holders of the preference shares than with a broad-based formula. This is less favourable to founders because, on conversion, more ordinary shares will be issued to investors, causing further dilution to ordinary shareholders.
  • non-binding
    describes documents and agreements that are not legally enforceable (e.g. a term sheet).
  • non-compete
    a typical restraint of trade that appears in shareholders’ agreements and restricts an individual (generally a founder) from setting up, or being employed or engaged by a competing business after leaving the business.
  • non-cumulative dividends
    dividends that do not roll over from year to year if they are not paid and may be withheld by a company at its discretion. Typically a right associated with preference shares, they are much more common than cumulative dividends.
  • non-participating liquidation preference
    entitles holders of preference shares to receive back a fixed as a minimum on a company’s liquidity event, with the remaining proceeds distributed on a pro rata basis to ordinary shareholders only. For example, a 1x non-participating preference ensures that an investor will receive back the higher of (i) their investment on a liquidity event and (ii) their pro-rata equity share in the company.
  • non-solicit
    an example of a typical restraint of trade that appears in a shareholders’ agreement, restricts an individual (often a founder) from taking on with either employees or engaging customers of a business after leaving.
  • NVCA
    the National Venture Capital Association, the US venture capital association.
  • NVCA model term sheet
    a form of investment term sheet released online for free by the NVCA. Many term sheets used in Southeast Asia are based on this model term sheet.
  • observer right
    entitles an individual to attend board meetings in a non-voting capacity. Such rights are often granted to investors as an alternative to a full board seat.
  • one-year cliff
    in the context of options granted under an ESOP, the 12 month period that must expire before any of those options vest.
  • option
    the contractual right of a holder to require a company to issue shares to them in the future, subject to the payment of an exercise price. Options often have a fixed expiry date, at which point the option lapses.
  • option grant
    the process of a company giving options to a recipient (which is typically an employee, contractor, or director of the company).
  • option holder
    a person to whom options have been granted.
  • option pool
    the maximum number of options that can be allocated under an ESOP without amending the ESOP rules or adopting a new plan. Usually the pool will be set at around 10-15% of a company’s total shares in issue on a fully diluted basis.
  • option register
    a record of all of the options a company has granted which should be held by a company. Such register will note details of vesting schedules, expiry dates and exercise dates of each option grant.
  • optional conversion
    the right that investors typically have to convert their preference shares into ordinary shares at any time by serving a notice on a company. Detailed conversion procedures are usually set out in a company’s constitution.
  • ordinary shares
    shares in a company which do not have any special or preferential rights. Ordinary shares generally give holders one vote and are typically held by founders and/or the initial shareholders of a company.
  • participating liquidation preference
    after payment of a liquidation preference amount, entitles holders of preference shares to share in the remaining liquidation proceeds on a pro rata basis with the ordinary shareholders. Participating liquidation preferences can significantly reduce the amount of proceeds that ordinary shareholders will receive on a liquidity event, and are not as common in Southeast Asia as non-participating liquidation preference.
  • participation right
    in the context of a convertible note, the investor’s right to participate in a subsequent equity financing on the same terms as the investors in that financing round.
  • Personal Data Protection Act 2010 (PDPA) (Malaysia)
    the legislation governing data protection in Malaysia.
  • Personal Data Protection Act 2012 (Cap. 26) (PDPA) (Singapore)

    the legislation governing data protection in Singapore.

  • personal guarantee
    an individual’s legally binding promise to ensure that a debt will be repaid.  It is common practice for banks to require founders to give personal guarantees for loans to early stage businesses. Personal guarantees are rarely provided in the context of convertible notes however.
  • post-money valuation
    the value of a company after it has received investment in a fundraising round.
  • power of attorney

    a formal authority that a company or person grants to another company to sign certain documents on their behalf.

  • pre-emptive rights
    the obligation of a company to offer any new shares and/or securities to investors and/or the existing shareholders of the company pro rata before issuing them to any third party. Pre-emptive rights allow investors to maintain their existing shareholding percentage, and are a common principle set out in shareholders’ agreements and constitutions.
  • pre-money valuation
    the value of a company before it has received investment in a fundraising.
  • preference shares
    a class of shares which takes priority over ordinary shares in various respects (i.e. gives the shareholder preferential rights). There are various types of preferential rights including liquidation preferenceanti-dilution protectionconversion rights, and preferential dividends. Most series A deals in Southeast Asia will involve issuing preference shares to investors.
  • preferential dividend
    the right to receive a dividend or other distribution in priority to other shareholders when a liquidity event occurs. Preferential dividends can be cumulative dividends or non-cumulative dividends.
  • pro rata
    in the context of pre-emptive rights or ROFR, means offering shares to shareholders in proportion to their existing shareholdings.
  • Promotion of Investments Act (PIA) 1986 (Malaysia)

    the legislation which regulates investments in Malaysia and requires investors to obtain government approval for all domestic and foreign investment in Malaysia.

  • PT PMA

    Perseroan Terbatas Penanaman Modal Asing, a limited liability company established under Indonesian law which allows for foreign shareholders and which is subject to more restrictions than a company which has only local shareholders.

  • qualified IPO
    an IPO which is completed above a specified valuation and/or which raises gross proceeds above an agreed amount.
  • qualifying equity financing
    in the context of a convertible note, the minimum amount a company needs to raise to cause automatic conversion of the note to occur. This helps to ensure that the fundraising is a legitimate company financing appropriate to trigger conversion of the investment amount into shares.
  • redemption
    the right of a shareholder or a company to redeem shares in issue at a specified price. Rights of redemption are sometimes included as part of exit rights, so that if an exit is not achieved in a specified time frame, investors can get their money back via a redemption of their shareholding.
  • Reg. 82 (Indonesia)
    Government Regulation No. 82 of 2012 regarding Provisions of Electronic systems and Transactions in Indonesia.
  • register of members
    the list of shareholders of a company and details of their shareholdings. For companies incorporated in Singapore, this would be the EROM.
  • registration rights
    rights held by investors which oblige a company to sell securities to the public. These rights are common in the US, and increasingly included in investment documentation in Southeast Asia.
  • representations and warranties
    included in a share subscription agreement and a SPA, a set of statements that the company (and sometimes founders) confirm as being true as part of a fundraising or exit transaction. If any of the representations or warranties are untrue, investors may be entitled to make a claim against the warrantors.
  • reserved matters
    restrictions on a company from taking certain actions without the consent of a specified investor, or investors holding a certain percentage of a class of shares (usually a majority). Also referred to as affirmative vote items or investor veto items.
  • restraint of trade
    a clause which restricts one party from competing with the other party, and/or obtaining or soliciting the other party’s clients, customers and/or employees.
  • ROFO
    right of first offer - the obligation on a shareholder wishing to sell their shares to a third party to first invite offers from some or all of the other shareholders, which the selling shareholder is not obliged to accept.
  • ROFR
    right of first refusal - the obligation on a shareholder wishing to transfer their shares to a third party to first offer those shares to the other shareholders on a pro rata basis.
  • rolling close
    an arrangement under which a company has a set amount of time following completion of a fundraising to find additional investors to invest on the same terms.
  • runway
    the length of time a company can continue to operate if its income and expenses stay the same based on the company’s burn rate and the company’s cash.
  • SAFE
    a simple agreement for future equity, a form of convertible note that was released online by the US accelerator, Y-Combinator in 2013. The investment converts on a future equity financing or on exit but has no maturity date nor interest acruing. As a result, a SAFE is generally considered to be more favourable to the company than a KISS and investors are less inclined to invest using this form of instrument.
  • secondary sales
    sometimes part of a fundraising transaction, the sale of shares by existing shareholders to an incoming investor.
  • securities
    a share or other financial instrument which converts into a share or provides a person with the right to be issued a share (such as an option or warrant).
  • Securities and Futures Act (Cap. 289) (Singapore)
    the Act which regulates securities in Singapore. Under this Act, all offers of securities in Singapore must be accompanied by a prospectus unless the offer is exempted under the Act.
  • securities laws
    the laws which govern the issue of securities to investors in a specific country. Such laws will often require a company to comply with disclosure requirements (such as issuing a prospectus) if it wishes to issue securities to the public, unless the issue of such securities falls within certain exceptions. Securities laws vary from country to country and companies need to consider where each investor is domiciled.
  • seed investment
    a very early investment into a startup. Seed investors commonly include friends and family or angel investors. See our template seed investment term sheet.
  • series A
    a startup’s first significant round of fundraising. A series A financing round will usually take place after a seed investment round, with the total investment monies typically between S$2million and S$10million in Southeast Asia. See our template series A investment term sheet.
  • series financing
    the rounds of a startup’s equity financing usually led by VC funds. These include series seed (or seed preference), series A, series B, series C etc.
  • share subscription agreement
    an agreement made between a company (sometimes founders) and investors under which the company agrees to issue shares to the investors at an agreed subscription price. The agreement typically includes closing mechanics, conditions precedent, and representations and warranties.
  • shareholders’ agreement
    an agreement made between a company and all of the shareholders of that company which, amongst other matters, sets out how a company is to be governed.
  • SIAC
    The Singapore International Arbitration Centre, an independent arbitration organisation based in Singapore. In Southeast Asia, most dispute resolution clauses in investment documents require disputes to be resolved by SIAC. SIAC is seen as a reliable venue for dispute resolution due to Singapore’s strong reputation and legal system.
  • single trigger acceleration
    a mechanism in an ESOP under which all unvested options immediately vest (i.e. accelerate) on an exit event. Potential acquirers of a company can be put off by this mechanism because it does not provide an incentive for key employees to stay and continue growing the business after the exit occurs.
  • SPA
    a sale and purchase agreement which documents a transaction in which a buyer aquires another company's shares, or its business and assets.
  • specific disclosures
    disclosures that provide information relating to warranties provided in a subscription agreement or SPA.
  • stamp duty
    tax that needs to be paid when executing share transfer documentation in certain countries, including Singapore.
  • SVCA
    the Singapore Venture Capital Association, the member based organisation which promotes venture capital development and private equity in Singapore.
  • tag-along rights
    rights that allow minority shareholders to sell their shares in a company if a majority wishes to sell their shares in a company. The majority shareholder(s) must ensure that the proposed purchaser also buys the minority shareholders’ shares on the same terms, or the sale cannot proceed.
  • term sheet
    non-binding agreement outlining the key terms and conditions of a transaction. See our template seed investment term sheet and series A termsheet.
  • TGE

    token generation event, a form of raising capital in which cryptocurrency tokens are generated and sold to investors. Some commentators distinguish TGEs from ICOs by way of the security or type of cryptocurrency offered up for sale.

  • tranched investment

    a form of investment where subscription monies are paid in instalments by investors over a period of time, often subject to the company achieving certain performance milestones.

  • transaction documents
    the long form and legally binding documents that record the terms of an investment transaction or acquisition.
  • UK Bribery Act

    the Act which sets out UK anti-corruption laws. Investors in Southeast Asia sometimes seek warranties and undertakings from startups as to their compliance with UK Bribery Act standards, despite having no connection to the UK.

  • unvested
    refers to shares or options that have not yet vested.
  • valuation cap
    in the context of a convertible note, a cap on the conversion price that a note holder will have to pay when their investment amount converts into shares. Usually set by reference to an agreed valuation of the company.
  • VC
    venture capital - the term used to describe capital investment in startups or early stage  businesses, usually by professional investors.
  • venture debt
    a type of debt financing which often accompanies an equity financing round. This helps a company raise additional capital whilst limiting dilution. Often warrants are issued to the venture debt provider as part of the arrangement.
  • vested
    shares or options which have gone through a vesting period, and are now unconditionally owned by their holder with no further ability of the company to claw-back shares.
  • vesting
    the process by which shares or options become vested progressively over a period of time or once certain conditions have been fulfilled.
  • vesting period
    the period of time before during which vesting occurs. In Southeast Asia, this is typically 3-4 years, often with a one-year cliff.
  • VIMA
    The Venture Capital Investment Model Agreements, the industry standard documents for VC investments in Singapore. See the documents here.
  • voting rights
    the right to vote attached to shares held in a company, such rights which are set out in the constitution.
  • warrant
    an agreement that enables a holder to buy shares in a company at a fixed price. Warrants are often issued to investors as an additional incentive for investing and can typically accompany venture debt rounds.
  • warrant instrument
    the instrument that creates a warrant and sets out its terms.
  • warrantors
    the entities and/or individuals providing representations and warranties to investors in connection with an investment or sale transaction.
  • weighted average
    a type of anti-dilution protection which provides that where shares are issued at a lower price than holders paid for their preference shares, the conversion price is adjusted down in accordance with a formula. The weighted average formula looks at the shares issued across the life of the company, which results in a much fairer adjustment from the founders’ perspective, as compared to full ratchet anti-dilution protection. Weighted average formulas can be broad based or narrow based.
  • winding up
    the process by which a company’s assets are sold to pay off the company’s debts in connection with a ceasing of the business' operations.