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Loan Conversion To Equity Agreement Template for Nigeria

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Key Requirements PROMPT example:

Loan Conversion To Equity Agreement

"I need a Loan Conversion to Equity Agreement for my Nigerian tech startup where a US-based venture capital firm wants to convert their $500,000 loan into a 25% equity stake, with the conversion to be completed by March 2025 and including anti-dilution provisions."

Document background
The Loan Conversion To Equity Agreement is a crucial document in Nigerian corporate finance, typically used when a company seeks to improve its balance sheet by converting debt to equity, or when lenders wish to take an equity position in a promising business. This agreement is particularly relevant in scenarios involving startup financing, corporate restructuring, or strategic investments. The document must comply with Nigerian legislation, including CAMA 2020, Investment and Securities Act 2007, and relevant Central Bank of Nigeria regulations. It outlines the conversion mechanism, valuation methodology, resulting shareholding structure, and completion requirements. The agreement is especially important in the current Nigerian business environment where alternative financing structures are increasingly being utilized for business growth and debt restructuring.
Suggested Sections

1. Parties: Identification of the Lender(s) and the Company (Borrower)

2. Background: Recitals describing the original loan agreement, current status, and parties' intention to convert the loan to equity

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

4. Loan Status and Acknowledgment: Confirmation of the outstanding loan amount and accrued interest to be converted

5. Conversion Terms: Details of the conversion mechanism, including conversion price/ratio and timing

6. Conditions Precedent: Conditions that must be satisfied before the conversion can take place

7. Implementation of Conversion: Step-by-step process for executing the conversion

8. Resulting Share Structure: Description of the post-conversion shareholding and share rights

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

10. Covenants: Ongoing obligations of the parties

11. Completion Mechanics: Specific actions required at completion of the conversion

12. Termination: Circumstances under which the agreement can be terminated

13. Notices: Communication procedures between parties

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

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

Optional Sections

1. Shareholder Rights: Additional rights granted to the converting lender as a new shareholder, used when the lender will receive special rights

2. Board Representation: Rights of the converting lender to appoint directors, used when board seats are part of the conversion deal

3. Anti-dilution Protection: Provisions protecting the value of the converted shares, used in cases of sophisticated investors

4. Foreign Exchange Provisions: Specific provisions for handling foreign currency aspects, used when foreign currency loans are involved

5. Multiple Lender Provisions: Coordination mechanisms between multiple converting lenders, used when multiple loans are being converted

6. Regulatory Compliance: Specific provisions addressing regulatory requirements, used when specific regulatory approvals are needed

7. Tax Provisions: Specific tax-related provisions and allocations, used when complex tax implications exist

Suggested Schedules

1. Original Loan Agreement: Copy or key terms of the original loan agreement(s)

2. Calculation of Conversion Amount: Detailed calculation of the loan amount including principal and interest to be converted

3. Valuation Report: Independent valuation report or agreed valuation methodology

4. New Share Certificate Format: Format of share certificates to be issued upon conversion

5. Required Corporate Resolutions: Form of board and shareholder resolutions required for the conversion

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

7. Post-Conversion Cap Table: Detailed breakdown of the post-conversion shareholding structure

8. Required Regulatory Filings: Forms and documents required for regulatory compliance

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

Financial Services

Technology and Startups

Manufacturing

Real Estate

Energy and Resources

Healthcare

Telecommunications

Agriculture

Construction

Retail and Consumer Goods

Relevant Teams

Legal

Finance

Corporate Secretariat

Treasury

Compliance

Risk Management

Corporate Development

Investment

Board of Directors

Executive Management

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Corporate Secretary

Investment Manager

Managing Director

Chief Executive Officer

Treasury Manager

Corporate Finance Manager

Compliance Officer

Risk Manager

Investment Banker

Private Equity Manager

Venture Capital Manager

Financial Controller

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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