The Loan Conversion To Equity Agreement is typically used when a company wishes to strengthen its balance sheet by reducing debt obligations or when a lender seeks to become a shareholder rather than maintain creditor status. Common in growth companies and startups in England and Wales, this agreement details the mechanics of converting debt to equity, including valuation methods, share class rights, and completion procedures. It must comply with English company law requirements, particularly regarding share issuance and capital maintenance rules. The document is especially relevant during financial restructuring, seed funding conversions, or as part of pre-planned investment strategies.
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1. Parties: Identification of the lender and borrower/company
2. Background: Details of the original loan and reason for conversion
3. Definitions: Key terms used throughout the agreement
4. Loan Details: Amount, date, and terms of the original loan
5. Conversion Terms: Specific terms of conversion including share price and number of shares
6. Conditions Precedent: Conditions that must be met before conversion can occur
7. Completion Mechanics: Process and timing of the conversion
1. Warranties: Company representations about its status and authority - used when additional assurance is required about company status
2. Anti-dilution Provisions: Protection against future share dilution - used when requested by converting lender
3. Tag-along Rights: Right to join in sale of shares - used for minority shareholder protection
1. Original Loan Agreement: Copy of the original loan documentation
2. Share Certificate Template: Form of share certificate to be issued
3. Board Resolutions: Required company approvals
4. Shareholder Resolutions: If required for share issuance
5. Companies House Forms: Required statutory forms for filing
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