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Note Conversion Agreement Template for England and Wales

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Key Requirements PROMPT example:

Note Conversion Agreement

"I need a Note Conversion Agreement to convert a £500,000 convertible note issued to an angel investor into Series A preferred shares, with the conversion to take place following our upcoming funding round in March 2025."

Document background
A Note Conversion Agreement is utilized when parties wish to convert existing debt instruments into equity shares. This document, governed by English and Welsh law, is particularly common in startup financing where initial debt funding is designed to convert to equity upon specific triggering events. The agreement details the conversion mechanism, price calculations, and resulting shareholding structure, while ensuring compliance with UK company law and financial regulations. It typically follows either a qualifying funding round, an exit event, or reaches a maturity date specified in the original convertible note agreement.
Suggested Sections

1. Parties: Identification of the contracting parties, including full legal names and registered addresses

2. Background: Context of the agreement, details of the existing note, and purpose of the conversion

3. Definitions: Key terms used throughout the agreement including Conversion Price, Conversion Date, and Securities

4. Conversion Terms: Specific terms and mechanics of the note conversion, including conditions precedent

5. Conversion Price: Details of conversion price calculation, adjustments, and any price protection mechanisms

6. Conversion Procedure: Process and timing for executing the conversion, including notice requirements

7. Representations and Warranties: Standard assurances from both parties regarding capacity, authority, and compliance

8. Governing Law and Jurisdiction: Confirmation of applicable law (England and Wales) and dispute resolution forum

Optional Sections

1. Anti-dilution Provisions: Protection mechanisms against share dilution, typically included for sophisticated investors

2. Tag-along Rights: Rights allowing noteholder to join in any sale of shares by major shareholders

3. Information Rights: Rights to receive company financial and operational information post-conversion

4. Board Appointment Rights: Rights to appoint directors post-conversion, typically for larger investments

Suggested Schedules

1. Original Note: Copy of the original convertible note being converted

2. Form of Conversion Notice: Template notice to be used when executing the conversion

3. Capitalization Table: Current and post-conversion share capital structure of the company

4. Board Resolutions: Company resolutions approving the conversion and share issuance

5. New Articles of Association: If required, amended articles reflecting new share classes or rights

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions






























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Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company operations including share capital requirements, directors' duties, share issuance procedures, pre-emption rights, and company registration requirements

Financial Services and Markets Act 2000: Regulates financial services industry, covering financial promotion restrictions, regulated activities, investor protection provisions, and prospectus requirements

Corporate Insolvency and Governance Act 2020: Legislation governing corporate insolvency, restructuring provisions and creditor rights

Financial Services Act 2012: Updates to regulatory framework and financial market regulations

Consumer Credit Act 1974: Regulations concerning consumer lending, relevant if the original note involves consumer credit

Law of Property (Miscellaneous Provisions) Act 1989: Fundamental contract law legislation governing property and contractual arrangements

Income Tax Act 2007: Tax legislation governing income tax implications of note conversion

Corporation Tax Act 2010: Tax legislation governing corporate tax implications of note conversion

Taxation of Chargeable Gains Act 1992: Tax legislation governing capital gains implications of note conversion

UK Listing Rules: Regulations applicable to listed companies regarding public trading and compliance requirements

Market Abuse Regulation: Regulations preventing market abuse and ensuring market integrity for listed companies

Private International Law: Legal framework governing cross-border transactions and conflicts of law rules for multi-jurisdictional arrangements

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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