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Equity Commitment Letter Template for New Zealand

A formal document governed by New Zealand law that represents a binding commitment from an investor or group of investors to provide a specified amount of equity funding for a particular transaction or investment purpose. The letter outlines the key terms of the equity commitment, including the amount, conditions precedent, timing of funding, and any specific requirements under New Zealand securities and financial markets regulations. It serves as a crucial document in transaction structuring, providing certainty to all parties regarding the availability of funding and the conditions under which it will be provided.

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What is a Equity Commitment Letter?

The Equity Commitment Letter is a fundamental document in New Zealand investment transactions, particularly in private equity, M&A, and significant corporate investments. It is typically used when an investor or consortium needs to provide formal assurance of their ability and intention to fund a transaction. The document, governed by New Zealand law and subject to local regulatory requirements including the Financial Markets Conduct Act 2013, serves as a bridge between initial investment discussions and final transaction documentation. An Equity Commitment Letter includes critical details such as commitment amount, funding conditions, timing, and termination rights, providing security to transaction counterparties while protecting investors through carefully structured conditions precedent. The document is particularly important in transactions where there is a time gap between commitment and funding, or where third-party reliance on the funding commitment is required.

What sections should be included in a Equity Commitment Letter?

1. Date and Parties: Identifies the date of the letter and the key parties - typically the equity provider(s), the target company, and any other relevant parties such as the lead investor or transaction counterparty

2. Background/Context: Brief description of the proposed transaction or investment that necessitates the equity commitment

3. Commitment Amount: Clear statement of the specific amount of equity being committed and the form of the investment (e.g., ordinary shares, preferred shares)

4. Purpose of Commitment: Specific description of how the committed funds will be used

5. Conditions to Funding: Key conditions that must be satisfied before the commitment becomes binding or before funds must be provided

6. Timing of Funding: Specifics about when and how the committed funds will be provided

7. Termination Provisions: Circumstances under which the commitment may terminate or expire

8. Governing Law: Specification of New Zealand law as governing law and relevant jurisdiction

9. Signature Block: Execution section including date and authorized signatories

What sections are optional to include in a Equity Commitment Letter?

1. Representations and Warranties: Basic representations about authority to enter into the commitment and validity of obligations. Include when dealing with institutional investors or complex transactions

2. Confidentiality: Provisions regarding confidential treatment of the letter and its terms. Include when not covered by a separate confidentiality agreement

3. Assignment: Restrictions on transfer or assignment of the commitment. Include when there are multiple investors or complex transaction structures

4. Regulatory Approvals: Discussion of any required regulatory approvals. Include when the investment requires overseas investment office approval or other regulatory consents

5. Fee and Expense Reimbursement: Provisions regarding transaction costs and who bears them. Include in larger transactions or when market practice requires

What schedules should be included in a Equity Commitment Letter?

1. Form of Funding Notice: Template notice to be used when calling for the committed funds

2. Key Transaction Terms: Summary of the key terms of the proposed investment or transaction

3. Corporate Authority Evidence: Requirements for evidence of corporate authority to enter into the commitment

4. Sources and Uses: Detailed breakdown of funding sources and intended uses, if the transaction involves multiple funding sources

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

New Zealand

Cost

Free to use

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