Capital Markets and Corporate Finance

Buying the shares means taking over the company as it stands, with all its contracts and all its liabilities, known or not. Buying the business means picking the assets you want and leaving most liabilities behind, but each asset has to be transferred separately and many contracts need the other side's consent. Most private deals in Singapore are share purchases.

Your lawyers review the company's records, contracts, licences, assets, employees, borrowings and disputes, and run public searches, to find risks before you sign. Most due diligence in Singapore is 'red flag' review, reporting only material issues. What it finds shapes the price, the warranties and any specific indemnities.

Warranties are the seller's statements of fact about the company; if one turns out to be untrue, the buyer can claim damages for the loss. Indemnities are promises to pay for specific, identified risks, often ones found in due diligence, and are easier to claim on. Sellers usually limit their liability with caps, thresholds and time limits.

Under Rule 14 of the Singapore Code on Take-overs and Mergers, a mandatory general offer is triggered if you, with anyone acting in concert with you, acquire 30% or more of the voting rights, or if you already hold between 30% and 50% and acquire more than 1% more in any six months. The offer must be in cash or have a cash alternative.

Usually: how the board is made up, which decisions need more than a simple majority (reserved matters), how deadlock is broken, restrictions on selling shares (pre-emption and first refusal), drag-along and tag-along rights, dividend policy, non-compete and confidentiality, and how disputes are resolved.

A joint venture company is a separate legal person, which limits each partner's liability and suits a long-term venture with shared assets and staff, but it brings more formality. A contractual joint venture is quicker and cheaper to set up and end, and suits a single project, but each party holds its own assets and liabilities and risks being treated as a partnership.

Both let an investor put money in now and receive shares later, at the next priced round, usually with a valuation cap and a discount. A convertible note is a loan: it carries interest, has a maturity date and may have to be repaid if it never converts. A SAFE is not a loan: it carries no interest, has no maturity date and does not have to be repaid.