Document background
The Promissory Note Conversion Agreement is a crucial document used when a company and its debt holder(s) agree to convert outstanding debt into equity shares. This type of agreement is commonly used in Canadian business transactions during various scenarios, including startup financing rounds, debt restructuring, or when companies need to improve their balance sheet by reducing debt obligations. The agreement must comply with Canadian federal and provincial securities regulations, corporate laws, and tax requirements. It typically includes detailed conversion terms, share issuance provisions, representations and warranties, and necessary corporate approvals. This document is particularly important in growth-stage companies, restructuring situations, or when investors prefer to convert their debt positions into equity stakes. The agreement must address specific Canadian regulatory requirements, including provincial securities exemptions and corporate law provisions under the relevant jurisdiction.
