Convertible Bond Subscription Agreement Template for Hong Kong

A comprehensive legal agreement governed by Hong Kong law that establishes the terms and conditions under which an investor subscribes to convertible bonds issued by a company. The document details the subscription amount, interest rate, maturity period, and conversion mechanisms, including the price and timing for converting the bonds into equity shares. It incorporates Hong Kong regulatory requirements, particularly those under the Companies Ordinance and Securities and Futures Ordinance, while setting out the rights and obligations of both the issuer and subscriber, including representations, warranties, and events of default.

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What is a Convertible Bond Subscription Agreement?

The Convertible Bond Subscription Agreement is a crucial financing instrument in Hong Kong's corporate landscape, commonly used by companies seeking to raise capital while offering investors the flexibility to convert their investment into equity. This document is particularly relevant for growth-stage companies and those preparing for potential public listings. It must comply with Hong Kong's regulatory framework, including the Companies Ordinance (Cap. 622) and Securities and Futures Ordinance (Cap. 571). The agreement typically includes detailed provisions on conversion mechanics, anti-dilution protections, and investor rights, making it suitable for both institutional and sophisticated individual investors. It serves as a bridge between debt and equity financing, offering companies a way to secure funding while potentially deferring equity dilution.

What sections should be included in a Convertible Bond Subscription Agreement?

1. Parties: Identification of the Bond Issuer and the Subscriber(s)

2. Background: Context of the bond issuance, company status, and purpose of the financing

3. Definitions and Interpretation: Definitions of key terms and interpretation rules

4. Subscription and Issue: Terms of subscription, payment mechanics, and conditions precedent

5. Bond Terms: Principal terms including interest rate, maturity date, and repayment provisions

6. Conversion Rights: Conversion mechanism, price, timing, and adjustment provisions

7. Representations and Warranties: Statements by both issuer and subscriber about their capacity and authority

8. Covenants: Ongoing obligations of the issuer and subscriber

9. Events of Default: Circumstances constituting default and consequent rights

10. Transferability: Provisions regarding transfer of bonds and conversion rights

11. Notices: Communication procedures between parties

12. General Provisions: Standard legal provisions including governing law, jurisdiction, and amendments

What sections are optional to include in a Convertible Bond Subscription Agreement?

1. Security: Include when bonds are secured against specific assets

2. Guarantees: Include when there are third-party guarantors

3. Anti-dilution Provisions: Include for listed companies or when specifically negotiated

4. Tag-Along Rights: Include when requested by subscribers for protection in change of control

5. Information Rights: Include for private companies to ensure transparency

6. Pre-emptive Rights: Include when subscribers are given rights in future financing rounds

7. Board Nomination Rights: Include when subscribers are granted board representation rights

What schedules should be included in a Convertible Bond Subscription Agreement?

1. Bond Certificate Form: Template of the physical or electronic bond certificate

2. Conversion Notice Form: Standard form for exercising conversion rights

3. Company Information: Key corporate details including capital structure and subsidiaries

4. Conditions Precedent: Detailed list of conditions to be satisfied before completion

5. Financial Covenants: Specific financial ratios and requirements to be maintained

6. Conversion Price Adjustments: Detailed mechanisms for adjusting conversion price

7. Completion Requirements: Detailed steps and documents required at completion

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

Jurisdiction

Hong Kong

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use

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