The Future Equity Agreement (FEA) is a crucial instrument in the Philippine startup ecosystem, designed to facilitate early-stage investments while deferring complex valuation discussions. This document type emerged as a solution to the challenges faced by startups in raising initial capital when company valuation is difficult to determine. Under Philippine law, particularly considering the Revised Corporation Code and Securities Regulation Code, the FEA provides a structured way to invest in companies while complying with local regulatory requirements. It is commonly used when companies are seeking seed funding or bridge financing, offering investors the right to convert their investment into equity at a later date, typically during a qualified financing round. The agreement includes essential provisions for conversion mechanics, valuation caps, and investor rights, while ensuring compliance with Philippine corporate, securities, and foreign investment laws.
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1. Parties: Identification of the investor(s) and the company, including complete legal names and addresses
2. Background: Context of the agreement, including company status and purpose of the investment
3. Definitions: Definitions of key terms used throughout the agreement
4. Investment Amount: Details of the investment amount and payment terms
5. Future Equity Right: Core terms of the future equity right, including triggering events for conversion
6. Conversion Mechanics: Detailed mechanics of how and when the investment converts to equity
7. Valuation Cap: Specification of the valuation cap for conversion purposes
8. Discount Rate: The discount rate applicable to the conversion, if any
9. Company Representations: Company's representations and warranties
10. Investor Representations: Investor's representations and warranties
11. Information Rights: Investor's rights to receive company information
12. Most Favored Nation Provision: Ensures investor receives best terms offered to other investors
13. Amendment and Waiver: Procedures for modifying the agreement or waiving rights
14. Governing Law: Specification of Philippine law as governing law
15. Dispute Resolution: Procedures for resolving disputes
16. General Provisions: Standard boilerplate provisions including notices, assignment, and severability
1. Foreign Investment Compliance: Required when investor is foreign, addressing Philippine foreign investment restrictions
2. Pro-rata Rights: Optional rights for investor to participate in future funding rounds
3. Board Observer Rights: Optional rights for investor to observe board meetings
4. Confidentiality Provisions: Detailed confidentiality terms if not covered in separate agreement
5. Tax Provisions: Specific tax-related provisions if complex tax implications exist
6. Founders' Obligations: Specific commitments required from founders, if any
7. Exit Rights: Special rights in case of company sale or IPO
1. Schedule A - Cap Table: Current capitalization table of the company
2. Schedule B - Disclosure Schedule: Company disclosures against representations and warranties
3. Schedule C - Form of Notice of Conversion: Template for conversion notice
4. Schedule D - Investment Amount Details: Breakdown of investment amount and payment schedule if applicable
5. Schedule E - Key Terms of Qualifying Financing: Definition and parameters of qualifying financing round
6. Appendix 1 - Calculation Methods: Detailed formulas for conversion calculations
7. Appendix 2 - Required Corporate Actions: List of corporate actions needed to implement the agreement
Relevant legal definitions
Clauses
Relevant Industries
Technology
Financial Services
E-commerce
Healthcare
Biotechnology
Renewable Energy
Software Development
Digital Media
Fintech
Telecommunications
Agricultural Technology
Education Technology
Manufacturing
Retail Innovation
Logistics and Supply Chain
Relevant Teams
Legal
Finance
Executive Leadership
Corporate Development
Investment
Compliance
Corporate Secretariat
Business Development
Strategy
Risk Management
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Corporate Lawyer
Investment Manager
Startup Founder
Venture Capital Associate
Angel Investor
Corporate Secretary
Business Development Director
Investment Analyst
Legal Counsel
Finance Director
Compliance Officer
Board Member
Company Director
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