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Convertible Bond Agreement Template for England and Wales

A Convertible Bond Agreement under English and Welsh law is a legally binding document that establishes the terms under which bonds can be converted into equity shares of the issuing company. The agreement details the conversion mechanics, interest payments, maturity dates, and circumstances triggering conversion rights. It incorporates key protections for both issuers and bondholders, including anti-dilution provisions and events of default, while ensuring compliance with UK securities regulations and corporate law.

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What is a Convertible Bond Agreement?

The Convertible Bond Agreement is a sophisticated financing instrument used when companies seek to raise capital while offering investors the flexibility to convert their debt investment into equity. This document, governed by English and Welsh law, is particularly valuable for growth-stage companies or those requiring bridge financing. It provides detailed terms for the bond issuance, including conversion rights, pricing mechanisms, and investor protections. The agreement must comply with UK securities laws, Financial Conduct Authority regulations, and the Companies Act 2006, making it a complex but essential tool for corporate financing.

What sections should be included in a Convertible Bond Agreement?

1. Parties: Identification of issuer and bondholder(s), including full legal names and registered addresses

2. Background: Context of the bond issuance, purpose of the financing, and key commercial terms

3. Definitions: Key terms used throughout the agreement, including financial, technical and legal definitions

4. Bond Terms: Principal amount, interest rate, maturity date, payment terms and mechanics of the bonds

5. Conversion Rights: Terms and conditions for converting bonds to shares, including conversion period, price and process

6. Representations and Warranties: Statements of fact and assurances from the issuer regarding its status and capacity

7. Covenants: Ongoing obligations of the issuer, including financial covenants and reporting requirements

8. Events of Default: Circumstances constituting default and consequences, including acceleration rights

9. Meetings and Voting: Procedures for bondholder meetings and voting on key decisions

10. Transfers and Registration: Rules and procedures for transfer of bonds and maintaining register of bondholders

11. Notices: Method and requirements for giving notices under the agreement

12. Governing Law and Jurisdiction: Specification of English and Welsh law as governing law and jurisdiction for disputes

What sections are optional to include in a Convertible Bond Agreement?

1. Security: Details of any security or collateral provided for the bonds, including ranking and enforcement

2. Guarantees: Terms of any guarantees provided by third parties or group companies

3. Transfer Restrictions: Specific limitations on transfer of bonds, including any lock-up periods or qualifying criteria

4. Tax Provisions: Specific tax-related provisions, including gross-up obligations and withholding tax requirements

5. Change of Control: Specific provisions dealing with change of control of the issuer, including put rights

What schedules should be included in a Convertible Bond Agreement?

1. Form of Conversion Notice: Template notice for bondholders to exercise their conversion rights

2. Calculation of Conversion Price: Detailed methodology for determining share conversion price, including adjustments

3. Form of Bond Certificate: Template of the physical bond certificate if applicable, including key terms

4. Anti-dilution Provisions: Detailed provisions protecting bondholders from dilution through corporate actions

5. Details of Security: Detailed description of any security assets and enforcement mechanisms

6. Form of Transfer Certificate: Template for documenting transfers of bonds between holders

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

England and Wales

Cost

Free to use

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