Convertible Agreement Template for England and Wales

A Convertible Agreement lets early-stage investors fund a company now while deciding the exact investment terms later. It works like a loan that can turn into shares, typically when the company raises its next major funding round or hits specific milestones.

Under English law, these agreements help startups get quick funding without the complexity of setting a firm company valuation right away. Investors usually get a discount on future shares and sometimes a valuation cap as rewards for their early support. The conversion happens automatically when trigger events occur, as specified in the agreement's terms.

Use a Convertible Agreement when your startup needs quick funding but setting a company valuation feels premature or too complex. It's particularly valuable during pre-seed or seed rounds, when traditional equity investment might take too long or cost too much in legal fees.

This tool works brilliantly for British tech startups racing to launch products or expand teams before their Series A round. It appeals to angel investors and accelerators who understand your need for speed and flexibility. The agreement becomes especially useful when you're planning a larger funding round within 12-18 months but need bridge financing now.

• Convertible Bond Agreement: Most basic form, ideal for straightforward debt-to-equity conversions with fixed terms
• Convertible Notes Agreement: Flexible structure with variable interest rates and conversion discounts
• Convertible Bond Subscription Agreement: Comprehensive version with detailed investor rights and subscription procedures
• Convertible Debenture Agreement: Secured version offering asset-backed protection to investors
• Convertible Note Contract: Simplified format for smaller investments with basic conversion features

• Startup Founders: Use Convertible Agreements to secure quick funding without immediate valuation discussions
• Angel Investors: Provide early-stage capital with potential for equity conversion at favourable terms
• Corporate Lawyers: Draft and review agreements to ensure compliance with UK company law and FCA regulations
• Financial Advisors: Guide clients on investment terms, conversion mechanics, and valuation implications
• Company Directors: Approve and execute agreements as part of their corporate governance duties
• Company Secretaries: Maintain records and handle administrative aspects of conversions

• Company Details: Gather full legal names, registration numbers, and registered addresses of all parties
• Investment Terms: Define investment amount, interest rate, maturity date, and any conversion discount
• Valuation Cap: Decide if you'll include one and at what level to set it
• Conversion Triggers: Specify qualifying funding rounds, exit events, or other conversion circumstances
• Security Features: Determine if the investment needs asset backing or guarantees
• Board Approval: Confirm director authorization and shareholder consent requirements
• Documentation: Prepare cap table, financial statements, and existing investor rights

• Parties Section: Full legal names, addresses, and registration details of company and investors
• Investment Terms: Principal amount, interest rate, and maturity date clearly stated
• Conversion Rights: Detailed mechanics of when and how the investment converts to equity
• Qualifying Events: Specific circumstances triggering automatic or optional conversion
• Valuation Provisions: Any caps, discounts, or calculation methods for conversion price
• Default Terms: Consequences and remedies for breach or non-payment
• Governing Law: Explicit statement of English law jurisdiction and enforcement
• Execution Block: Proper signature sections for all parties and witnesses

A Convertible Agreement differs significantly from a Bond Purchase Agreement in several key ways, though both involve investment in a company. Let's explore the main differences:

• Conversion Rights: Convertible Agreements automatically transform into equity upon specific triggers, while Bond Purchase Agreements typically remain as debt until maturity
• Valuation Flexibility: Convertible Agreements delay valuation discussions until a later funding round, whereas Bond Purchase Agreements require immediate fixed terms
• Investment Timeline: Convertible Agreements are typically shorter-term bridges to equity, while Bond Purchase Agreements often have longer, fixed maturity periods
• Investor Protection: Bond Purchase Agreements usually offer more security and fixed returns, while Convertible Agreements provide potential equity upside but less certainty
• Documentation Complexity: Convertible Agreements are generally simpler and faster to execute, requiring less extensive due diligence than Bond Purchase Agreements