The Convertible Loan Note Agreement is a crucial financing instrument in the Malaysian business landscape, particularly for companies seeking growth capital without immediately setting a firm valuation. This document type is commonly used when a company needs funding but either the parties cannot agree on a current valuation or prefer to defer the valuation discussion to a future funding round. The agreement, governed by Malaysian law, provides detailed terms for the loan, including the principal amount, interest rate, maturity date, and crucially, the mechanisms and triggers for converting the loan into equity shares. It includes essential protections for both the lender and the company, compliance with Malaysian securities regulations, and typically contains provisions for various scenarios such as exits, future funding rounds, or defaults. The document is particularly relevant for startups and growth-stage companies seeking bridge financing or strategic investment.
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1. Parties: Identification of the Lender(s) and the Company (Borrower)
2. Background: Context of the agreement, including the Company's business and purpose of the loan
3. Definitions: Definitions of key terms used throughout the agreement
4. Loan Amount and Drawdown: Specification of the loan amount, drawdown conditions and mechanics
5. Interest: Interest rate, calculation method, and payment terms
6. Conversion Rights: Terms and conditions for converting the loan into equity, including conversion price and mechanism
7. Conversion Triggers: Events that trigger mandatory or optional conversion rights
8. Repayment: Terms for repayment of the loan if not converted
9. Company's Representations and Warranties: Standard and specific warranties about the Company's status, capacity, and business
10. Lender's Representations and Warranties: Warranties regarding the lender's capacity and authority
11. Company Covenants: Ongoing obligations of the Company during the loan period
12. Events of Default: Circumstances constituting default and consequences
13. Termination: Circumstances and process for terminating the agreement
14. Notices: Process and requirements for formal communications between parties
15. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, and assignment
1. Security: Include if the loan is to be secured against Company assets
2. Guarantee: Include if there are personal or corporate guarantors
3. Information Rights: Include if lender requires specific information access beyond statutory requirements
4. Board Observer Rights: Include if lender is to have board observation rights
5. Anti-Dilution Protection: Include if additional protection against dilution is required beyond standard conversion adjustments
6. Tag-Along Rights: Include if lender requires right to participate in future share sales
7. Subordination: Include if loan is to be subordinated to other debt
8. Transfer Restrictions: Include if specific restrictions on transfer of the loan note are required
1. Schedule 1 - Loan Details: Commercial terms including amount, interest rate, maturity date
2. Schedule 2 - Conversion Mechanics: Detailed process and formulae for conversion calculations
3. Schedule 3 - Conditions Precedent: List of conditions to be satisfied before drawdown
4. Schedule 4 - Form of Conversion Notice: Template notice for exercising conversion rights
5. Schedule 5 - Company Information: Key company details including capitalization table
6. Schedule 6 - Warranties: Detailed list of company warranties
7. Schedule 7 - Deed of Adherence: Form for new parties to adhere to the agreement
8. Appendix A - Calculation Examples: Examples of conversion and interest calculations
Relevant legal definitions
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Relevant Industries
Technology
E-commerce
Fintech
Healthcare
Biotechnology
Manufacturing
Renewable Energy
Software Development
Consumer Products
Education Technology
Agricultural Technology
Digital Services
Infrastructure
Real Estate
Relevant Teams
Legal
Finance
Corporate Development
Treasury
Compliance
Executive Management
Company Secretarial
Investment
Risk Management
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Legal Counsel
Investment Manager
Corporate Lawyer
Finance Director
Company Secretary
Investment Analyst
Venture Capital Associate
Corporate Development Manager
Treasury Manager
Financial Controller
Compliance Officer
Board Director
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