Document background
The Compulsory Convertible Debentures Agreement is utilized when a company seeks to raise capital through a debt instrument that will automatically convert to equity, typically used in growth financing scenarios or pre-IPO stages. This document is essential in the Canadian market where securities regulations and corporate law requirements must be carefully navigated. It outlines the complete framework of the debt instrument, including interest payments, security arrangements (if any), and conversion mechanics, while ensuring compliance with both federal and provincial regulations. The agreement is particularly relevant for companies looking to strengthen their balance sheet while providing investors with assured equity participation, making it a popular choice in growth sectors and scale-up situations. The mandatory conversion feature distinguishes it from standard convertible debentures, requiring careful attention to conversion triggers, price mechanisms, and resulting shareholding structures.
