Convertible Note Shareholders Agreement

To raise funds by issuing convertible bonds, it is possible to use either a convertible note subscription agreement or a convertible note instrument. If a company subscribes to one (or very little) investor for the note, a conversion note subscription agreement can be used. Because investors with convertible bonds don`t receive shares in advance, you have less paperwork to do. Unlike a Simple Agreement for Future Equity (SAFE), a convertible loan established under a convertible bond contract is remunerated, has a maturity date and sets a minimum amount of funds to be obtained for equity financing. The terms of conversion of convertible bonds into equity under a convertible note subscription agreement are eligible financing in the event of a liquidity event or on a maturity date. However, unlike equity investors, convertible bond investors are not yet shareholders of the company. This means you need fewer documents and you don`t need to alert ASIC. You can also issue your investor with a converted letter certificate, but this is optional. A convertible note underwriting agreement is a contract for an investor to purchase a convertible bond, a debt instrument converted into equity under pre-defined terms. Mandatory conversion. This indication is transformed into equity as defined below, issued by the Company at the time of the maturity of that note (as defined below) at a price equal to the « conversion price » described in subsection B.

At the time of conversion in the subsequent series of shares, your convertible bond investors generally receive the same class of shares as your investors, usually at an updated share price as a reward for the anticipated investment of convertible bond investors. A convertible bond may also have an interest or valuation rate cap. While a convertible bond may be a simpler and faster way to invest compared to a series of outsourced stocks, you still need to be careful about how convertible bonds fit into your future plans.