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Loan Conversion To Equity Agreement

Loan Conversion To Equity Agreement Template for Australia

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Key Requirements PROMPT example:

Loan Conversion To Equity Agreement

"Need a Loan Conversion To Equity Agreement for our Australian tech startup to convert three convertible notes totaling AUD 2.5M into Series A preferred shares at a pre-money valuation of AUD 10M, with completion targeted for March 2025."

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Document background
The Loan Conversion To Equity Agreement is a vital instrument in Australian corporate finance, commonly used when companies seek to strengthen their balance sheet by converting debt to equity, or when lenders wish to become shareholders in a company. This document is particularly relevant in scenarios such as startup funding conversions, distressed debt situations, or strategic investment arrangements. The agreement must comply with Australian corporate law, particularly the Corporations Act 2001 and ASIC regulations, and typically includes detailed provisions on conversion mechanics, share valuation, corporate governance changes, and regulatory compliance. It's essential for companies looking to restructure their capital arrangement while ensuring all parties' rights and obligations are clearly defined and protected. The document serves as a comprehensive record of the transaction, including all necessary approvals, calculations, and conditions for the conversion process.
Suggested Sections

1. Parties: Identification of the borrower company and the lender(s) who will become shareholder(s)

2. Background: Recitals explaining the existing loan arrangement and intention to convert to equity

3. Definitions and Interpretation: Key terms used throughout the agreement and interpretation rules

4. Existing Loan Details: Description of the current loan arrangement including amount, interest, and any security

5. Conversion Mechanics: Process and methodology for converting the loan to equity, including calculation methods

6. Conversion Price and Valuation: Agreed company valuation and share price calculation for the conversion

7. Timing and Conditions Precedent: When conversion will occur and conditions that must be met before conversion

8. New Shares Details: Description of the shares to be issued, including class, rights, and ranking

9. Completion Requirements: Actions required by each party to effect the conversion

10. Representations and Warranties: Standard and specific warranties from both parties

11. Corporate Governance: Any changes to company management or control resulting from the conversion

12. Releases and Discharge: Release of loan obligations upon conversion

13. General Provisions: Standard legal provisions including notices, governing law, and dispute resolution

Optional Sections

1. Security Release: Required if the original loan was secured and security needs to be released

2. Multiple Lender Provisions: Required for handling multiple converting lenders and their respective rights

3. Regulatory Compliance: Specific provisions required for regulatory compliance (e.g., foreign investment approval)

4. Shareholder Rights: Special rights or protections for the converting lender as a new shareholder

5. Tax Provisions: Specific tax treatment and obligations related to the conversion

6. Future Capital Raisings: Rights or restrictions regarding future equity issuance

7. Tag-Along/Drag-Along Rights: Optional rights for share sale participation or forced sale

8. Board Appointment Rights: Rights of the new shareholder to appoint directors

9. Put/Call Options: Optional rights for future share disposal or acquisition

Suggested Schedules

1. Loan Details Schedule: Complete details of the existing loan arrangement including payment history

2. Company Information: Current company structure, share capital, and shareholder information

3. Conversion Calculations: Detailed methodology and calculations for the conversion

4. New Constitution/Shareholders Agreement: If required, new constitutional documents reflecting changed ownership

5. Form of Share Certificate: Template for new share certificates to be issued

6. Required Corporate Resolutions: Forms of board and shareholder resolutions required for conversion

7. Completion Checklist: List of all documents and actions required for completion

8. ASIC Forms: Required regulatory forms for lodgment

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions












































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Relevant Industries

Technology

Startups

Financial Services

Professional Services

Healthcare

Manufacturing

Real Estate

Infrastructure

Mining

Renewable Energy

Retail

E-commerce

Biotechnology

Agriculture

Education

Relevant Teams

Legal

Finance

Corporate Development

Compliance

Risk Management

Executive Leadership

Board of Directors

Investment

Treasury

Company Secretariat

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Finance Director

Corporate Lawyer

Legal Counsel

Company Secretary

Investment Manager

Financial Controller

Business Development Director

Corporate Development Manager

Venture Capital Partner

Private Equity Manager

Risk Manager

Compliance Officer

Board Director

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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