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Convertible Loan Agreement

Convertible Loan Agreement Template for Malaysia

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Key Requirements PROMPT example:

Convertible Loan Agreement

"I need a Convertible Loan Agreement under Malaysian law for a RM 500,000 investment in a tech startup, with automatic conversion triggered at a RM 10 million valuation and 20% discount rate on the next funding round."

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Document background
The Convertible Loan Agreement serves as a crucial financing instrument in the Malaysian business landscape, particularly for startups and growing companies seeking bridge financing with potential equity participation. This document is commonly used when companies need immediate funding but face challenges in determining accurate valuations, or when parties wish to defer valuation discussions to a future funding round. The agreement provides flexibility by combining debt financing characteristics with the potential for equity participation, making it attractive for both investors and companies. Under Malaysian law, these agreements must comply with various regulations including the Companies Act 2016, Capital Markets and Services Act 2007, and relevant securities laws, particularly regarding share issuance and debt-to-equity conversion mechanisms.
Suggested Sections

1. Parties: Identification of the Lender, Company (Borrower), and any guarantors

2. Background: Context of the loan arrangement and purpose of the agreement

3. Definitions: Definitions of key terms used throughout the agreement, including financial and conversion-related terminology

4. Loan Amount and Disbursement: Details of the loan amount, disbursement conditions and procedures

5. Interest: Interest rate, calculation method, and payment terms

6. Repayment Terms: Repayment schedule, methods, and prepayment provisions

7. Conversion Rights: Terms and conditions for converting the loan into equity, including trigger events and conversion price/mechanism

8. Conversion Procedure: Step-by-step process for executing the conversion

9. Representations and Warranties: Standard representations and warranties from both parties

10. Company Covenants: Positive and negative covenants binding the company during the loan period

11. Events of Default: Circumstances constituting default and consequences

12. Termination: Conditions and process for terminating the agreement

13. Notices: Communication procedures between parties

14. Governing Law and Jurisdiction: Specification of Malaysian law as governing law and jurisdiction for disputes

15. General Provisions: Standard boilerplate clauses including assignment, amendments, and severability

Optional Sections

1. Security: Include when the loan is secured by company assets or guarantees

2. Anti-Dilution Protection: Include to protect conversion rights from dilution through corporate actions

3. Information Rights: Include when lender requires specific reporting or information access rights

4. Board Observer Rights: Include when lender is granted right to appoint board observer

5. Tag-Along Rights: Include when lender requires right to participate in future share sales

6. Most Favored Nation Clause: Include to ensure lender receives best terms if company issues other convertible instruments

7. Subordination Provisions: Include when loan needs to be subordinated to other debt

8. Tax Provisions: Include detailed tax treatment when specific tax considerations apply

Suggested Schedules

1. Schedule 1 - Conditions Precedent: List of conditions to be satisfied before loan disbursement

2. Schedule 2 - Form of Conversion Notice: Template notice for exercising conversion rights

3. Schedule 3 - Company Information: Details of company's share capital, shareholding structure, and material contracts

4. Schedule 4 - Calculation of Conversion Price: Detailed formula and examples for calculating conversion price

5. Schedule 5 - Warranties: Detailed list of company warranties

6. Appendix A - Financial Covenants: Detailed financial covenants and calculation methods

7. Appendix B - Draw Down Request Form: Template for requesting loan disbursement

8. Appendix C - Shareholders' Agreement Terms: Key terms to be included in shareholders' agreement post-conversion

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
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Relevant Industries

Technology

E-commerce

Fintech

Healthcare

Manufacturing

Renewable Energy

Software Development

Biotechnology

Education Technology

Digital Services

Consumer Products

Professional Services

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Compliance

Investment

Corporate Secretarial

Risk Management

Executive Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Legal Counsel

Investment Manager

Corporate Finance Manager

Company Secretary

Finance Director

Venture Capital Associate

Investment Analyst

Corporate Lawyer

Financial Controller

Business Development Director

Startup Founder

Treasury Manager

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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