Singapore early-stage financing
Singapore CARE Convertible Agreement: Equity Conversion and Funding Terms
Connect the signed funding terms to dilution, investor rights and the evidence of a completed allotment.
CARE is the Convertible Agreement Regarding Equity used in the Singapore VIMA financing suite. The official download currently contains a file labelled VIMA 2.1 Model CARE. In that form, a qualifying equity financing converts the investment into preference shares using the calculation that yields more shares; maturity instead gives the investor an election to receive ordinary shares on written notice. The signed version and any departures remain decisive.
Before accepting funding, complete the price inputs and test financing, maturity, sale and dissolution outcomes against the full cap table. An outstanding CARE is not the same as issued shares. Prepare the corporate approvals and allotment implementation alongside the contract.
Key takeaways
- A valuation cap supplies a contractual pricing input; it does not promise a fixed percentage after the next round.
- The capitalisation definition can change dilution even when two instruments display the same headline cap.
- A long-stop, sale or dissolution outcome must be established from the signed provisions, including notice and election requirements.
- Corporate authority and the private company’s register update are separate completion checks.
Identify the CARE version and negotiated choices
The official VIMA download contains the file VIMA 2.1 Model CARE.docx. That file and its explanatory notes were reviewed for this discussion. The host page calls the wider suite VIMA 2.0; keep both the download date and the specific document filename rather than treating the suite name as a complete version reference.
Create a document index with the model version, marked changes, completed schedule, side letters and signature pages. Check which provisions were retained or deleted. Where a term sheet conflicts with the signed CARE, ask counsel to resolve the inconsistency rather than modelling both as if they apply.
For an issuer still being established, the Singapore company registration requirements establish the underlying entity and officers. A financing document then needs the correct issuer name, UEN and authority; forming the company alone does not approve the funding terms.
The model contains a representation that the parties have used the form without changes other than the permitted blanks and dispute-resolution choice. If the parties negotiate wider changes, ask counsel to make the document internally consistent with that representation. A heavily edited agreement should not retain a statement that it is unmodified.
Check the funding document set
Identify the current form, negotiated alternatives and missing approvals before the investment closes.
Separate pricing inputs from investor ownership
| Input | Question to settle | Effect on the model |
|---|---|---|
| Funding amount | What amount is actually paid and when? | Sets the amount to which the applicable formula is applied. |
| Qualifying financing | Which event and threshold trigger conversion? | A small fundraising may fall outside the chosen definition. |
| Cap and discount | Which apply, and how do the alternatives interact? | Determines the applicable conversion price. |
| Capitalisation | How are options and other instruments counted? | Changes the denominator and dilution. |
| Conversion class | What rights attach to the issued shares? | Share count alone does not describe voting or exit rights. |
The VIMA publishers’ usage guidance cautions that the suite does not cover every transaction option. Treat the table as a negotiation worksheet, not a list of universal CARE entitlements. Record each answer with a clause reference and an adviser responsible for unresolved drafting.
A cap is different from a promised next-round valuation. The capitalisation denominator deserves the same attention as the headline cap: option pools, other convertible securities and timing assumptions can affect the result. Identify the basis before comparing offers.
In the reviewed model, Discount Price is the lowest new-money preference share price multiplied by the Discount Rate. Thus an 80% Discount Rate means paying 80% of the relevant price, economically a 20% discount. CARE Price is the Valuation Cap divided by Company Capitalisation. The model compares Consideration divided by each price and uses the greater number of CARE Preference Shares.
The capitalisation definition includes issued shares, this CARE and other convertible instruments, issued options and the unissued option pool, without double-counting. Because the instrument itself enters the calculation, ask the preparer to solve and reconcile the complete model instead of inserting an arbitrary existing-share count.
Stress-test the conversion calculation
For an arithmetic illustration, assume S$100,000 of Consideration, a S$1.00 lowest new-money share price and an 80% Discount Rate. Discount Price is S$0.80 and the discount calculation produces 125,000 shares. If the completed cap calculation gives a CARE Price of S$0.50, the alternative produces 200,000 shares; the reviewed model selects the greater share count. These are assumed commercial inputs, not recommended terms.
If the round price falls to S$0.40, the 80% input produces a S$0.32 Discount Price and 312,500 shares on that limb. Recompute the CARE Price with the correct contemporaneous Company Capitalisation before comparing. Do not reuse a denominator from an earlier scenario. New investment, other conversions and option changes can affect ownership even when the principal is unchanged.
Calculate the post-round ownership only after adding the relevant existing shares, new round shares and other conversions. A percentage quoted before new money enters the round may differ materially from ownership after completion. Keep a separate voting-rights view if classes carry different votes.
Map conversion to corporate completion
ACRA’s return of allotment instructions distinguish private and public companies. For a private company, the allotment takes effect on filing when the electronic register of members is updated. The guidance states the 14-day return deadline for public companies; do not import that statement as a substitute for the private company’s effectiveness rule.
Check member authority, constitution, pre-emption provisions, class rights and contractual consents. The approval and allotment filing sequence is the implementation workstream after the conversion calculation is agreed. A contractual trigger, director approval and updated register should each have their own evidence.
The completion file should reconcile the signed calculation, funding ledger, resolutions, number and class of shares, filed particulars and resulting cap table. Private-company register effectiveness should be reflected in transaction timing and investor communications.
Prepare the conversion evidence
Reconcile the proposed calculation with authority, share rights and register data.
Resolve the no-round and early-exit cases
The reviewed model’s maturity mechanism is an investor conversion election. On or after the Maturity Date, the investor can require ordinary shares calculated from Consideration divided by CARE Price by giving at least seven days’ written notice. It should not be described as an automatic cash repayment at maturity. A separately negotiated repayment clause would require analysis of the actual amended document.
The model’s liquidity-event mechanism compares the Consideration multiplied by the negotiated Multiple with an as-converted amount, subject to the payment priority provisions. Dissolution instead refers to the Consideration, subject to applicable law. Creditor claims rank ahead of the specified cash-out entitlement; insufficient proceeds can limit recovery. The instrument does not promise that funds exist.
Check the MFN amendment, information rights, dividend-equivalent provision, restrictions and cost reimbursement as well as conversion. The model includes an obligation concerning later CARE documents and an investor mechanism to adopt preferable terms. Maintain a register of instruments and notices so a later funding round does not overlook outstanding contractual changes.
Conversion at financing is also conditional on the investor signing the related transaction documents on the specified basis. Match the class rights to the constitution and financing documents. If the cap table, notice or approval is wrong, stop the filing and reconcile it before the company issues shares.
Choose a CARE signing position that can be implemented
Proceed when the parties can point to a single agreed document set, reproduce the conversion calculation and explain both the financing and no-financing outcomes. Resolve the issuer’s authority and the conversion-share rights before treating signature as the only remaining step.
Escalate any undefined denominator, conflicting side letter, unsupported share class or missing consent. Use an adviser-reviewed completion worksheet so that the commercial model, corporate records and filing data describe the same transaction.
Turn agreed terms into a filing plan
Bring the signed instrument, cap table and outstanding questions for a scoped corporate review.
Frequently asked questions
Does the published model approve our deal?
No. A model offers drafting material; it does not establish that your company has authorised the transaction or that the chosen terms suit both parties.
Can we calculate dilution from the cap alone?
No. Obtain the contract’s capitalisation definition and model other relevant securities and the new financing.
Should the funding date equal the signing date?
Use the dates and conditions actually agreed. Record receipt separately rather than assuming signatures prove payment.
Does accounting classification follow the CARE label?
The label is insufficient. Ask the accountant to assess the executed rights and obligations under the applicable reporting framework.
