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Convertible Note Agreement

Convertible Note Agreement Template for Pakistan

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Key Requirements PROMPT example:

Convertible Note Agreement

"I need a Convertible Note Agreement for my Lahore-based tech startup to secure PKR 10 million in seed funding, with a 15% discount rate on conversion and maturity date of March 1, 2025."

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Document background
The Convertible Note Agreement is a crucial financing instrument in Pakistan's growing startup ecosystem, commonly used when companies need interim financing before a larger equity round. This document type bridges the gap between debt and equity financing, providing companies with immediate capital while deferring complex valuation discussions. The agreement must comply with Pakistani corporate law, particularly the Companies Act 2017 and relevant Securities and Exchange Commission of Pakistan (SECP) regulations. It typically includes terms for principal amount, interest rate, maturity date, conversion triggers (such as qualified financing rounds), conversion price or discount rate, and investor rights. The document is especially valuable for early-stage companies where traditional equity valuation might be challenging or premature.
Suggested Sections

1. Parties: Identification of the Company (Issuer) and the Investor(s) (Note holder(s))

2. Background: Context of the investment and purpose of the convertible note

3. Definitions: Detailed definitions of terms used throughout the agreement

4. Subscription and Issuance: Details of the note amount, subscription process, and closing conditions

5. Interest: Interest rate, calculation method, and payment terms

6. Maturity and Repayment: Maturity date and repayment terms of the principal and accrued interest

7. Conversion Rights: Terms and mechanics of converting the note into equity, including conversion price and triggers

8. Qualified Financing: Definition and terms of qualified financing that triggers automatic conversion

9. Company Representations and Warranties: Company's representations about its legal status, authority, and business condition

10. Investor Representations and Warranties: Investor's representations about their investment capacity and eligibility

11. Information Rights: Investor's rights to receive financial and other company information

12. Events of Default: Circumstances constituting default and consequent remedies

13. Miscellaneous: Standard legal provisions including notices, amendments, governing law, and dispute resolution

Optional Sections

1. Multiple Closing Provisions: Required when the company plans to issue multiple notes in series

2. Foreign Investment Provisions: Required for foreign investors, addressing currency conversion and repatriation rights

3. Most Favored Nation: Optional protection ensuring investors receive the benefit of better terms offered to subsequent investors

4. Board Observer Rights: Optional rights for investors to attend board meetings as observers

5. Pre-emptive Rights: Optional rights for investors to participate in future financing rounds

6. Change of Control Provisions: Optional provisions dealing with company sale before conversion

7. Anti-dilution Protection: Optional provisions protecting against dilution from future stock issuances

Suggested Schedules

1. Schedule A - Note Certificate Form: Form of the convertible note certificate to be issued

2. Schedule B - Cap Table: Current capitalization table of the company

3. Schedule C - Conversion Mechanics: Detailed calculations and examples of conversion scenarios

4. Schedule D - Corporate Documents: Key corporate documents including certificate of incorporation and board resolutions

5. Schedule E - Disclosure Schedule: Company disclosures related to representations and warranties

6. Appendix 1 - Notice of Conversion: Form for exercising conversion rights

7. Appendix 2 - Shareholders' Agreement: Form of shareholders' agreement to be executed upon conversion

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions





































Clauses






























Relevant Industries

Technology

Financial Services

Healthcare

E-commerce

Software Development

Biotechnology

Clean Energy

Telecommunications

Manufacturing

Education Technology

Agriculture Technology

Digital Media

Real Estate Technology

Consumer Services

Relevant Teams

Legal

Finance

Corporate Development

Executive Leadership

Investment

Compliance

Treasury

Corporate Secretary Office

Business Development

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

Corporate Lawyer

Investment Manager

Venture Capital Associate

Financial Controller

Legal Counsel

Investment Banker

Startup Founder

Business Development Director

Corporate Finance Manager

Compliance Officer

Board Director

Investment Analyst

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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