The Loan Conversion To Equity Agreement is a critical document used when a lender agrees to convert their outstanding loan into equity shares in the borrower company. This arrangement is commonly utilized in corporate restructuring, startup funding rounds, or when companies need to strengthen their balance sheet by reducing debt. Under Danish law, the agreement must comply with the Danish Companies Act (Selskabsloven) regarding share capital modifications and corporate governance requirements. The document typically includes detailed provisions on conversion mechanics, valuation methodology, share issuance procedures, and necessary corporate approvals. It's particularly relevant in scenarios where companies seek to improve their debt-to-equity ratio or when investors wish to take a more active ownership role in the business. The agreement also addresses tax implications, regulatory requirements, and shareholder rights post-conversion.
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Key Requirements PROMPT example:
Loan Conversion To Equity Agreement
I need a Loan Conversion to Equity Agreement for converting a 鈧500,000 startup loan into 15% equity shares, with provisions for board representation and anti-dilution protection, to be completed by March 2025.
1. Parties: Identification of the Lender and Borrower (Company), including registration numbers and addresses
2. Background: Details of the existing loan agreement and circumstances leading to the conversion
3. Definitions: Key terms used throughout the agreement, including financial and technical definitions
4. Existing Loan: Description of the current loan terms, outstanding amount, and any accrued interest
5. Conversion Terms: Core terms of the conversion, including conversion price, number of shares to be issued, and timing
6. Conversion Mechanics: Step-by-step process for executing the conversion, including documentation requirements
7. Company's Obligations: Actions required by the company, including share issuance and corporate approvals
8. Representations and Warranties: Statements of fact and assurances from both parties
9. Conditions Precedent: Requirements that must be met before conversion can occur
10. Completion: Actions to be taken at completion of the conversion
11. Termination: Circumstances under which the agreement can be terminated
12. Governing Law and Jurisdiction: Confirmation of Danish law application and jurisdiction
1. Anti-dilution Protection: Provisions protecting the converter's shareholding from dilution, used when requested by the lender
2. Board Representation: Rights of the lender to appoint board members post-conversion, included when negotiated
3. Tag-Along Rights: Right to participate in future share sales, included for minority shareholder protection
4. Drag-Along Rights: Right to force minority shareholders to join in a sale, included for majority shareholder protection
5. Information Rights: Rights of the new shareholder to receive company information, included for significant shareholdings
6. Pre-emptive Rights: Rights related to future share issues, included when requested by the lender
1. Existing Loan Agreement: Copy of the original loan agreement being converted
2. Conversion Calculations: Detailed calculations showing conversion price and resulting shareholding
3. Form of Board Resolution: Template board resolution approving the conversion
4. Form of Shareholders' Resolution: Template shareholders' resolution approving the share issuance
5. Updated Articles of Association: Revised articles reflecting the new share structure post-conversion
6. Share Certificate Template: Form of share certificate to be issued post-conversion
7. Completion Checklist: List of actions and documents required for completion
Authors
Relevant legal definitions
Clauses
Relevant Industries
Technology and Startups
Financial Services
Real Estate
Manufacturing
Renewable Energy
Healthcare
Professional Services
E-commerce
Media and Entertainment
Biotechnology
Relevant Teams
Legal
Finance
Corporate Development
Treasury
Compliance
Risk Management
Board of Directors
Corporate Secretariat
Investment
Tax
Relevant Roles
Chief Financial Officer
Chief Executive Officer
Legal Counsel
Investment Manager
Corporate Finance Director
Financial Controller
Company Secretary
Board Director
Investment Analyst
Treasury Manager
Corporate Development Manager
Risk Manager
Compliance Officer
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