Unsecured Convertible Promissory Note for Australia

Unsecured Convertible Promissory Note Template for Australia

This document is an Australian law-governed unsecured convertible promissory note, which represents a debt instrument that can be converted into equity under specified conditions. The document establishes the terms of a loan that can be converted into company shares, typically during a future financing round or at the note holder's option. It includes provisions for interest calculation, conversion mechanics, events of default, and standard representations and warranties, all structured in compliance with Australian corporate and securities laws, particularly the Corporations Act 2001 (Cth) and related regulations.

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What is a Unsecured Convertible Promissory Note?

This Unsecured Convertible Promissory Note is designed for use in the Australian market as a flexible financing instrument, typically employed by companies seeking bridge financing or early-stage investment. It provides a mechanism for investors to loan money to a company with the right to convert the loan into equity shares under predetermined conditions, such as a qualified financing round or at maturity. The document incorporates essential elements required under Australian law, including compliance with the Corporations Act 2001 (Cth) and ASIC regulations. It's particularly useful for startups and growth companies that need immediate capital while deferring valuation discussions, offering investors the potential upside of equity participation while providing the security of a debt instrument.

What sections should be included in a Unsecured Convertible Promissory Note?

1. Parties: Identification of the issuer and note holder

2. Background: Context of the note issuance and relationship between parties

3. Definitions: Key terms used throughout the document including Maturity Date, Conversion Price, Qualified Financing, etc.

4. Promise to Pay: Core obligation to repay principal amount with specified interest

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

6. Maturity: Maturity date and repayment obligations

7. Conversion Rights: Terms and conditions for converting the note to equity

8. Conversion Mechanics: Process and procedures for executing conversion

9. Events of Default: Circumstances constituting default and consequences

10. Representations and Warranties: Standard company and note holder representations

11. General Terms: Standard boilerplate provisions including notices, amendments, governing law

What sections are optional to include in a Unsecured Convertible Promissory Note?

1. Security Interest: Used when any form of security is provided despite being generally unsecured

2. Subordination: Include when the note needs to be subordinated to other debt

3. Multiple Closings: Required when the note is part of a series of similar notes

4. Most Favored Nation: Protection if company issues notes with better terms

5. Board Observer Rights: If note holder is granted board observation rights

6. Information Rights: When holder is entitled to receive company financial information

7. Pre-emptive Rights: If holder gets rights to participate in future fundraising

8. Transfer Restrictions: If there are limitations on transferring the note

What schedules should be included in a Unsecured Convertible Promissory Note?

1. Schedule 1 - Note Details: Key commercial terms including principal amount, interest rate, maturity date

2. Schedule 2 - Conversion Calculations: Detailed methodology for calculating conversion price and number of shares

3. Schedule 3 - Form of Conversion Notice: Template notice for exercising conversion rights

4. Schedule 4 - Company Capitalization: Current cap table and capital structure

5. Appendix A - Qualified Financing Terms: Detailed definition and requirements for qualified financing

6. Appendix B - Required Shareholder Consents: List of required approvals for conversion

Authors

Alex Denne

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

Jurisdiction

Australia

Publisher

Genie AI

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions
Relevant Industries

Technology

Biotechnology

Financial Services

Software

Healthcare

Clean Energy

E-commerce

Manufacturing

Media and Entertainment

Professional Services

Agriculture Technology

Education Technology

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Executive Leadership

Investment

Company Secretariat

Risk Management

Compliance

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Company Secretary

General Counsel

Legal Counsel

Investment Manager

Corporate Lawyer

Finance Director

Venture Capital Associate

Investment Analyst

Corporate Development Manager

Treasury Manager

Financial Controller

Startup Founder

Managing Director

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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