The Convertible Equity Agreement is commonly used in the UK startup ecosystem when companies need to raise capital quickly without establishing a firm valuation. This document, governed by English and Welsh law, provides investors with the right to convert their investment into equity shares upon specified trigger events, such as a qualified funding round or exit event. It includes essential terms such as conversion rights, valuation caps, and investor protections, while ensuring compliance with UK company law and financial regulations. The agreement is particularly valuable for early-stage companies seeking bridge financing or pre-seed investment.
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1. Parties: Identification and details of the contracting parties
2. Background: Context and purpose of the agreement
3. Definitions: Key terms used throughout the agreement
4. Investment Amount: Details of the initial investment
5. Conversion Rights: Terms and conditions for conversion into equity
6. Valuation: Method of determining company valuation for conversion
7. Trigger Events: Events that trigger automatic conversion
1. Anti-dilution Protection: Protection mechanisms against share dilution, typically included when investors require protection against future down rounds
2. Information Rights: Provisions detailing investor rights to company information and financial reports, included when investors require regular access to company information
3. Pre-emption Rights: Rights allowing investors to participate in future funding rounds, included when investors want priority in future investments
1. Schedule 1: Company Details: Detailed information about the company structure and capitalization
2. Schedule 2: Conversion Calculations: Detailed methodology for calculating conversion terms
3. Schedule 3: Warranties: Company warranties given to the investor
4. Appendix A: Cap Table: Current and post-conversion shareholding structure
Relevant legal definitions
Agreement
Articles
Board
Business Day
Company
Completion
Conversion
Conversion Date
Conversion Price
Conversion Rights
Conversion Shares
Directors
Discount Rate
Encumbrance
Equity Securities
Exit Event
Fair Market Value
Fully Diluted Share Capital
Group
Investment Amount
Investor
IPO
Liquidation Event
Maturity Date
New Securities
Ordinary Shares
Parties
Pre-money Valuation
Qualified Financing
Qualified Financing Round
Share Capital
Shareholders
Subscription Amount
Trigger Event
Valuation Cap
Warranties
Articles
Board
Business Day
Company
Completion
Conversion
Conversion Date
Conversion Price
Conversion Rights
Conversion Shares
Directors
Discount Rate
Encumbrance
Equity Securities
Exit Event
Fair Market Value
Fully Diluted Share Capital
Group
Investment Amount
Investor
IPO
Liquidation Event
Maturity Date
New Securities
Ordinary Shares
Parties
Pre-money Valuation
Qualified Financing
Qualified Financing Round
Share Capital
Shareholders
Subscription Amount
Trigger Event
Valuation Cap
Warranties
Clauses
Subscription
Investment Amount
Conversion Rights
Conversion Mechanics
Trigger Events
Valuation
Anti-dilution Protection
Information Rights
Pre-emption Rights
Tag-along Rights
Drag-along Rights
Warranties
Confidentiality
Board Representation
Voting Rights
Assignment and Transfer
Most Favored Nation
Termination
Default
Notices
Costs
Governing Law
Jurisdiction
Entire Agreement
Amendments
Severability
Further Assurance
Counterparts
Investment Amount
Conversion Rights
Conversion Mechanics
Trigger Events
Valuation
Anti-dilution Protection
Information Rights
Pre-emption Rights
Tag-along Rights
Drag-along Rights
Warranties
Confidentiality
Board Representation
Voting Rights
Assignment and Transfer
Most Favored Nation
Termination
Default
Notices
Costs
Governing Law
Jurisdiction
Entire Agreement
Amendments
Severability
Further Assurance
Counterparts
Relevant Industries
Relevant Teams
Relevant Roles
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