The Convertible Debt Agreement is commonly used in the Danish market as a bridge financing tool, particularly suitable for growth companies and startups seeking to raise capital while deferring company valuation. This instrument offers flexibility by initially structuring the investment as debt, which can later convert to equity, typically during a qualified financing round or at maturity. The agreement must be carefully structured to comply with Danish law, particularly the Companies Act (Selskabsloven) and financial regulations. It typically includes provisions for interest payments, conversion mechanics, investor rights, and protection mechanisms. This type of agreement is particularly valuable when companies need immediate funding but prefer to postpone equity dilution or when there is uncertainty about current company valuation. The document includes comprehensive terms covering conversion triggers, price mechanisms, investor protections, and compliance with Danish corporate and securities laws.
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Key Requirements PROMPT example:
Convertible Debt Agreement
I need a Convertible Debt Agreement under Danish law for my tech startup to secure 鈧500,000 in funding from a venture capital firm, with automatic conversion upon reaching a Series A round and a 20% discount rate on conversion.
1. Parties: Identification of the lender(s) and the borrower company
2. Background: Context of the agreement and purpose of the convertible debt financing
3. Definitions: Definitions of key terms used throughout the agreement
4. Loan Amount and Issuance: Details of the principal amount, issuance date, and disbursement terms
5. Interest: Interest rate, calculation method, and payment terms
6. Maturity: Maturity date and repayment terms if conversion does not occur
7. Conversion Rights: Terms and conditions under which the debt can be converted into equity
8. Conversion Price and Mechanics: Formula for determining conversion price and detailed process for conversion
9. Representations and Warranties: Standard representations and warranties from both parties
10. Company Covenants: Ongoing obligations of the company during the term of the agreement
11. Events of Default: Circumstances constituting default and consequences
12. Amendments and Waivers: Process for modifying the agreement or waiving rights
13. Notices: How formal communications between parties should be made
14. Governing Law and Jurisdiction: Specification of Danish law and jurisdiction
15. Miscellaneous: Standard boilerplate provisions including severability, entire agreement, etc.
1. Security: Include when the convertible debt is secured by company assets
2. Subordination: Include when the convertible debt needs to be subordinated to other debt
3. Board Observer Rights: Include when the lender is granted rights to observe board meetings
4. Information Rights: Include when specific information rights are granted to the lender
5. Anti-dilution Protection: Include when additional protection against dilution is needed
6. Prepayment Terms: Include when early repayment is allowed
7. Multiple Closings: Include when the debt is to be issued in tranches
8. Tag-Along Rights: Include when lender should have tag-along rights post-conversion
9. Most Favored Nation: Include when terms should match any better terms given to future investors
1. Conversion Notice Form: Template form for exercising conversion rights
2. Cap Table: Current and post-conversion capitalization table
3. Calculation Examples: Examples of conversion calculations in different scenarios
4. Corporate Authorizations: Copies of board and shareholder resolutions authorizing the convertible debt
5. Disclosure Schedule: Exceptions to representations and warranties
6. Form of Note Certificate: Template for the physical note certificate if required
7. Investment Agreement Terms: Key terms that will apply post-conversion
8. Security Documentation: If applicable, documents relating to any security arrangements
Authors
Relevant legal definitions
Clauses
Relevant Industries
Technology
Biotechnology
Clean Energy
Financial Services
E-commerce
Healthcare
Software
Manufacturing
Consumer Goods
Professional Services
Media and Entertainment
Real Estate
Telecommunications
Relevant Teams
Legal
Finance
Executive Leadership
Corporate Development
Compliance
Treasury
Investment
Business Development
Board of Directors
Corporate Governance
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Chief Legal Officer
General Counsel
Investment Manager
Corporate Lawyer
Finance Director
Venture Capital Partner
Investment Analyst
Corporate Secretary
Business Development Director
Financial Controller
Compliance Officer
Board Member
Managing Director
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