Singapore Revenue Based Finance

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Revenue Sharing Agreement

Investment Structure Summary

In general, revenue sharing agreements be structured in a variety of methods under Singapore law by utilising elements of equity and/or debt. We have prepared the following summary based on two predominant methods of revenue sharing observed in the market:

  • an equity-like structure where the investor subscribe for securities in the company that is the subject of the investment (the “Company”), in return for which they typically receive a regular share of the Company’s post-tax profits through dividend payments; and 
  • a debt-like structure where the investor advances a principal sum to the Company as a loan, and the Company then makes regular repayments to the investors until a predetermined amount has been paid (e.g., 3-5x of the original principal amount advanced by investor(s)).

In each case, the agreement would be entered into between the Company, the investor(s) and, if necessary, a guarantor and an agent. 

The precise content of the agreement (and therefore the revenue sharing arrangements) is to be agreed between the parties. To illustrate, the agreement may provide that the investor will provide an amount to the Company in connection with the entry into the agreement and the Company will make periodic payments to the investors in accordance with an agreed revenue sharing percentage, schedule and/or until a fixed due date. 

The guarantor will guarantee to the investors the performance of the Company’s obligations under the agreement. The guarantor may be particularly relevant if there is any question in respect of the Company’s creditworthiness.

The agent will facilitate the revenue sharing arrangement (e.g. administering payments) and may be particularly relevant where there is a large number of investors or there is a need for investors to be able to trade (i.e. transfer) their interest in the revenue sharing agreement. 


Equity and debt

Category for tax purposes

Singapore has no capital gains tax, thus taking out cash as a contractual contingency (versus equity) generally does not provide any obvious tax efficiencies.

Otherwise, the precise content of the agreement can be agreed between the parties, and the specific tax arrangements will depend on the precise outcome.

Governance Rights

If the investor own equity in the Company, the parties can agree to include governance rights for the investor to participate in or influence the management of the Company, including any observation or consultation rights, voting rights, veto/approval rights in respect of particular matters, whether from equity or contractual rights and whether or not contingent upon the occurrence of specified events (e.g. springing right to vote in case of underperformance). 

If the investor has only advanced a loan without any equity component, it typically does not receive any governance rights in the Company in the absence of an event of default under a secured loan which triggers a receivership procedure. 

Investor Qualification Requirements

None, but in some cases, investors might require a license to advance a loan under the Moneylenders Act 2008.

Currency Considerations

The investment (and related payment obligations) may be denominated in any currency.

There are no material restrictions or conditions for the remittance of investment proceeds outside of Singapore. 


The parties can agree whether the agreement should include any collateral and/or guarantees. Among other things, the need for collateral and/or guarantees might rest on the creditworthiness and financial standing of the Company as well as the precise extent and duration of the revenue sharing arrangements.

Priority Payment Rights

The parties can agree whether the agreement should include a preferential right for the investor to receive distributions based on an agreed portion of (1) gross revenues, (2) free cash flow and/or (3) net income. 

Similar agreements would normally include late payment penalty and interest provisions to incentivize the parties’ timely fulfilment of their respective payment obligations. 

The Company may negotiate for the benefit of early total payment provisions which may have the effect of releasing it from all or part of its revenue sharing obligations.

Distribution and Redemption Limitations

Distribution and Redemption Limitations: The general rule under the Companies Act 1967 is the dividends can only be paid out of profits (including capital appreciation).

Aside from the above, the parties can agree whether the agreement should provide that the making of dividend payments or other distributions by the Company to investor as agreed pursuant to the transaction would be subject to any mandatory conditions, from an accounting perspective or otherwise (e.g. timing or frequency limitations, retained earnings or gains requirements, obligations that have mandatory priority over distributions to investor, limitations on mandatory redemptions for equity instruments, etc.)

Legal limitations to pricing or total return

There are no general restrictions under Singapore law. 

For the avoidance of doubt, there are no usury laws in Singapore, but any provision that requires payment of an additional or default interest pay not be enforceable if the payment is deemed to amount to a penalty sum (e.g., if the default interest is set so high as to be disproportionate to the lenders’ loss). 

Status in Insolvency Proceedings

Subject to any agreed collateral and/or guarantees, the investors will be an unsecured creditor of the Company.

Limitation of Liability

This is subject to contract and the parties can agree the precise liability regime and any limits on liability in the agreement.

The parties should consider and specify whether investors’ liability towards the Company and its creditors is limited to its funded or committed investment. The parties may further indicate whether specific types of liability or actions may be exceptions to such limitation (e.g. labor/pension claims, environmental claims, fraud).

If there is an agent in the structure, the investors will likely be required to indemnify the agent from all losses arising out of or incurred in connection with any claim brought by a third party against the agent for wrongdoing other than the agent’s gross negligence or willful misconduct.

The Company will likely be required to indemnify the investors against any losses incurred by the investors as a result of event of defaults or failure by the Company to pay any amount under the agreement. 

Transfer Restrictions

The parties can agree whether the investment would be subject to any transfer restrictions (e.g. limitations to assignment or other dispositions, securities laws limitations, approval for admission of new members/shareholders, etc.)

Critical Tax Considerations:

As mentioned above, Singapore has no capital gains tax, thus taking out cash as a contractual contingency (versus equity) generally does not provide any obvious tax efficiencies.

Otherwise, the precise content of the agreement can be agreed between the parties, and the specific tax arrangements will depend on the precise outcome.

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