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Convertible Agreement Regarding Equity

Convertible Agreement Regarding Equity Template for Netherlands

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Convertible Agreement Regarding Equity

"Need a Convertible Agreement Regarding Equity under Dutch law for a €500,000 investment from a US-based VC firm, with a 20% discount rate and automatic conversion on a Series A round, including special provisions for multiple co-investors and international wire transfers."

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Document background
The Convertible Agreement Regarding Equity (CAFE) is a vital instrument in the Dutch startup and scale-up ecosystem, designed to facilitate early-stage investment while deferring complex valuation discussions. This document is typically used when a company needs immediate funding but parties prefer to postpone establishing a firm valuation until a later financing round. Under Dutch law, the agreement must comply with specific corporate law requirements regarding share issuance and transfer restrictions. The document includes essential provisions such as conversion mechanisms, qualifying financing rounds, valuation caps, and discount rates, while also addressing investor rights and protections. It's particularly useful for bridge financing rounds and can accommodate both domestic and international investment structures within the Dutch legal framework.
Suggested Sections

1. Parties: Identification of the company, investor(s), and any other relevant parties

2. Background: Context of the investment and purpose of the agreement

3. Definitions: Definitions of key terms used throughout the agreement

4. Investment Amount: Details of the investment amount and payment terms

5. Interest: Terms regarding interest accrual on the investment amount

6. Conversion Rights: Conditions and mechanisms for converting the investment into equity

7. Conversion Price: Calculation method for the conversion price, including any discounts

8. Qualifying Financing: Definition and terms of qualifying financing triggering automatic conversion

9. Maturity Date: Terms regarding the maturity date and related conversion or repayment rights

10. Information Rights: Investor's rights to receive company information and financial reports

11. Pre-emptive Rights: Rights of first refusal on future share issuances

12. Transfer Restrictions: Limitations on transfer of rights under the agreement

13. Representations and Warranties: Standard company and investor representations

14. Confidentiality: Confidentiality obligations of all parties

15. Notices: Process for formal communications between parties

16. Governing Law and Jurisdiction: Specification of Dutch law and jurisdiction

Optional Sections

1. Most Favored Nation: Ensures investor gets best terms offered to future investors, optional for sophisticated investors

2. Anti-dilution Protection: Protection against share dilution, typically included for larger investments

3. Board Observer Rights: Rights to attend board meetings, typically for larger investments

4. Tag-Along Rights: Right to join in sale of shares by other shareholders, for significant investments

5. Exit Rights: Special rights in case of company sale or IPO, for strategic investors

6. Founder Commitments: Specific obligations for founders, relevant when founders are key to company

7. Multiple Closings: Provisions for multiple investment tranches, for staged investments

8. Security: Any security arrangements for the investment, if required

Suggested Schedules

1. Schedule 1: Company Details: Corporate information, share capital, and shareholding structure

2. Schedule 2: Subscription Details: Detailed terms of the investment and payment instructions

3. Schedule 3: Conversion Mechanics: Detailed procedures and calculations for conversion

4. Schedule 4: Cap Table: Current and post-conversion capitalization tables

5. Schedule 5: Warranties: Detailed company warranties

6. Schedule 6: Boilerplate Terms: Standard legal and administrative provisions

7. Appendix A: Form of Conversion Notice: Template for exercising conversion rights

8. Appendix B: Deed of Adherence: Template for additional investors to join the agreement

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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Technology

Software

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Clean Energy

Financial Technology

E-commerce

Healthcare Technology

Artificial Intelligence

Manufacturing

Consumer Products

Professional Services

Media and Entertainment

Telecommunications

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Relevant Teams

Legal

Finance

Corporate Development

Executive Leadership

Investment

Business Development

Compliance

Corporate Secretariat

Treasury

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

General Counsel

Investment Manager

Corporate Lawyer

Financial Director

Business Development Director

Startup Founder

Company Secretary

Investment Analyst

Corporate Development Manager

Venture Capital Associate

Legal Counsel

Finance Manager

Managing Partner

Industries








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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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