Royalty Based Financing Agreement Template for Singapore

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Key Requirements PROMPT example:

Royalty Based Financing Agreement

"Need a Royalty Based Financing Agreement for our Singapore-based SaaS company to secure $2M in financing from a venture capital firm, with royalty payments set at 3% of monthly recurring revenue until March 2025."

Document background
A Royalty Based Financing Agreement is utilized when companies seek alternative financing without diluting equity or taking on traditional debt. This document, structured under Singapore law, establishes the terms under which an investor provides capital in exchange for regular payments calculated as a percentage of the recipient's revenue or profits. The agreement typically covers payment mechanics, calculation methodologies, reporting requirements, and compliance with Singapore's regulatory framework. It's particularly suitable for companies with predictable revenue streams seeking growth capital while maintaining operational control.
Suggested Sections

1. Parties: Identification and details of the financing party and recipient

2. Background: Context of the financing arrangement and business relationship

3. Definitions: Key terms used throughout the agreement

4. Royalty Structure: Calculation method, rates, and payment terms for royalties

5. Payment Terms: Timing, method, and currency of payments

6. Reporting Requirements: Financial reporting obligations and audit rights

7. Term and Termination: Duration of agreement and termination provisions

8. Representations and Warranties: Standard declarations about the business, financial condition, and authority to enter agreement

9. Covenants: Ongoing obligations of the parties during the term of the agreement

10. Events of Default: Circumstances constituting default and consequences

11. Miscellaneous: Standard boilerplate provisions including notices, amendments, governing law

Optional Sections

1. Security Arrangements: Required if additional security or collateral is provided for the financing

2. International Payments: Currency conversion and cross-border payment terms when parties are in different jurisdictions

3. Intellectual Property Rights: IP ownership and licensing provisions when royalties are tied to IP exploitation

4. Change of Control: Provisions dealing with changes in ownership or control of the recipient company

5. Minimum Guaranteed Payments: Terms for minimum royalty payments if applicable

Suggested Schedules

1. Calculation Schedule: Detailed methodology for calculating royalties including formulas and examples

2. Reporting Template: Standard format for periodic financial reports and royalty calculations

3. Security Documents: Details of any security arrangements or guarantees provided

4. Business Plan: Projected financials and business strategy of the recipient

5. Key Financial Metrics: Definition and calculation of financial metrics used for royalty calculations

Authors

Alex Denne

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

Industries

Companies Act (Cap. 50): Primary legislation governing corporate entities in Singapore, relevant for establishing parties' corporate capacity and authority to enter into financing agreements

Securities and Futures Act (Cap. 289): Regulates securities and financial products, may be applicable if the royalty-based financing arrangement is structured as a security

Civil Law Act (Cap. 43): Contains fundamental contract law principles and regulations regarding interest rates and contractual obligations in Singapore

MAS Guidelines: Regulatory guidelines from the Monetary Authority of Singapore that may affect the structure and terms of financial arrangements

Income Tax Act (Cap. 134): Tax implications for royalty payments, including withholding tax requirements and deductibility of payments

Stamp Duties Act (Cap. 312): Requirements for stamp duty payments on financial instruments and agreements

Money Lending Act: May be applicable if the financing arrangement falls within the scope of money lending activities

Personal Data Protection Act 2012: Governs the collection, use, and disclosure of personal data in the agreement and related documentation

Electronic Transactions Act: Relevant for electronic execution and storage of agreements, especially important in modern business transactions

Financial Advisers Act (Cap. 110): May be relevant if financial advice is provided as part of the financing arrangement

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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