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Future Equity Agreement Template for Australia

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Key Requirements PROMPT example:

Future Equity Agreement

"I need a Future Equity Agreement for an Australian tech startup receiving a $500,000 investment from a Singapore-based venture capital firm, with a 20% discount rate and $5M valuation cap, including foreign investment compliance provisions."

Document background
The Future Equity Agreement is designed for early-stage investment scenarios in the Australian market where traditional equity investment structures may be premature or impractical. This agreement type, which gained popularity following Y Combinator's SAFE model, has been adapted to meet Australian legal requirements and market practices. It's particularly useful when companies need to raise capital quickly without determining a current valuation, typically during seed or pre-seed stages. The document provides a framework for investment that converts to equity upon specific trigger events, such as qualified financing rounds, sale events, or IPOs. Under Australian law, these agreements must comply with the Corporations Act 2001, ASIC regulations, and relevant securities laws, making them a sophisticated yet streamlined alternative to convertible notes or direct equity investment.
Suggested Sections

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

2. Background: Context of the agreement, including the company's business and investor's intention to invest

3. Definitions: Key terms used throughout the agreement, including 'Equity Financing', 'Liquidity Event', 'Dissolution Event', and 'Post-Money Valuation Cap'

4. Investment Amount: Specifies the investment sum and payment terms

5. Conversion Rights: Details when and how the investment converts to equity, including trigger events

6. Company Representations: Company's warranties about its legal status, authority, and capital structure

7. Investor Representations: Investor's warranties about investment capacity and sophistication

8. Terms of Conversion: Calculation method for converting investment to equity, including valuation cap and discount rate

9. Liquidity Events: Treatment of investment in case of sale, IPO, or other liquidity events

10. Dissolution Events: Rights and procedures in case of company dissolution or winding up

11. General Provisions: Standard legal provisions including notices, amendments, governing law, and assignment

Optional Sections

1. Most Favored Nation: Ensures investor gets best terms if company issues better terms in future SAFEs - use when requested by sophisticated investors

2. Pro-rata Rights: Gives investor right to participate in future funding rounds - include for strategic investors

3. Information Rights: Grants investors rights to receive financial information - typically for larger investments

4. Board Participation Rights: Gives investor right to board observer status - for significant investments

5. Drag Along Rights: Forces investor to join in company sale if majority agrees - for companies planning exit

6. Tag Along Rights: Allows investor to join in sale of shares by founders - for investor protection

7. Foreign Investment Provisions: Additional terms for foreign investors - required when foreign investment laws apply

Suggested Schedules

1. Schedule 1 - Corporate Information: Details of company structure, capitalization table, and existing shareholders

2. Schedule 2 - Conversion Calculations: Detailed examples and formulas for calculating equity conversion

3. Schedule 3 - Form of Conversion Notice: Template notice for triggering conversion of investment to equity

4. Schedule 4 - Deed of Accession: Template for investor to join shareholders agreement upon conversion

5. Appendix A - Investment Terms Summary: Summary of key commercial terms including investment amount, valuation cap, and discount rate

6. Appendix B - Shareholder Rights: Summary of rights attached to shares upon conversion

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions









































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Relevant Industries

Technology

Fintech

Biotech

Clean Energy

Software Development

E-commerce

Healthcare Technology

Digital Media

Artificial Intelligence

Manufacturing Innovation

Agtech

Education Technology

Space Technology

Quantum Computing

Robotics

Relevant Teams

Legal

Finance

Executive Leadership

Corporate Development

Compliance

Investment

Business Development

Company Secretariat

Risk Management

Strategic Planning

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

Startup Founder

Investment Manager

Venture Capital Associate

Angel Investor

Corporate Lawyer

Investment Banker

Company Secretary

Finance Director

Business Development Manager

Startup Attorney

Investment Analyst

Portfolio Manager

Compliance Officer

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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