Loan Note Subscription Agreement for New Zealand

Loan Note Subscription Agreement Template for New Zealand

A comprehensive legal agreement governed by New Zealand law that establishes the terms and conditions under which an investor subscribes to loan notes issued by a company. The document details the subscription process, payment terms, interest calculations, repayment provisions, and investor rights. It ensures compliance with New Zealand's Financial Markets Conduct Act 2013 and related regulations, while providing a framework for debt investment that may include features such as conversion rights, security arrangements, and transfer restrictions. The agreement balances the issuer's financing needs with investor protections and regulatory requirements.

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What is a Loan Note Subscription Agreement?

The Loan Note Subscription Agreement is a crucial document used in New Zealand when a company seeks to raise debt financing through the issuance of loan notes to investors. This financing method offers an alternative to traditional bank loans or equity funding, providing companies with greater flexibility in structuring their debt obligations. The agreement must comply with New Zealand's regulatory framework, particularly the Financial Markets Conduct Act 2013 and Companies Act 1993. It typically includes detailed provisions on subscription mechanics, interest payments, maturity dates, events of default, and potentially conversion rights or security arrangements. The document is particularly useful for companies seeking medium to long-term financing while maintaining control over their equity structure, and for investors looking for fixed-income investments with potentially enhanced returns through security or conversion features.

What sections should be included in a Loan Note Subscription Agreement?

1. Parties: Identifies the issuer company and the subscriber(s) entering into the agreement

2. Background: Sets out the context of the agreement, including the company's intention to issue loan notes and the subscriber's intention to invest

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation principles

4. Subscription: Details the agreement to subscribe for loan notes, including subscription amount and price

5. Issue of Loan Notes: Specifies the conditions precedent to issue, mechanics of issue, and timing

6. Payment Terms: Sets out interest rate, payment dates, calculation methods, and payment mechanics

7. Representations and Warranties: Contains statements of fact and assurances from both the issuer and subscriber

8. Undertakings: Details ongoing obligations of the issuer, including financial covenants and information rights

9. Events of Default: Lists circumstances that constitute default and the consequences thereof

10. Transferability: Specifies whether and how the loan notes can be transferred to other parties

11. Notices: Sets out how formal communications between parties should be made

12. General Provisions: Contains standard boilerplate clauses including governing law, jurisdiction, and amendment procedures

What sections are optional to include in a Loan Note Subscription Agreement?

1. Security: Include when the loan notes are secured against company assets

2. Conversion Rights: Include if the loan notes can be converted into equity

3. Redemption: Include if there are early redemption rights or obligations

4. Subordination: Include if the loan notes are subordinated to other debt

5. Tag-Along Rights: Include if subscribers have rights to participate in future equity raises

6. Meeting Provisions: Include if there are provisions for noteholder meetings and collective decision-making

7. Register of Noteholders: Include if multiple noteholders are contemplated

8. Taxes and Stamp Duty: Include detailed tax provisions if complex tax implications exist

9. Information Rights: Include if subscribers have specific rights to company information beyond standard undertakings

What schedules should be included in a Loan Note Subscription Agreement?

1. Form of Loan Note Certificate: Template certificate evidencing ownership of loan notes

2. Conditions Precedent: List of documents and conditions required before loan notes can be issued

3. Form of Transfer Instrument: Template document for transferring loan notes between parties

4. Details of Loan Notes: Specific terms of the loan notes including amount, interest rate, and maturity

5. Subscription Form: Form to be completed by subscribers, including KYC requirements

6. Financial Covenants: Detailed financial ratios and calculations the issuer must maintain

7. Security Documents: If secured, details of security arrangements and charged assets

8. Conversion Mechanics: If convertible, detailed procedures and calculations for conversion

9. Form of Accession Deed: Template for new subscribers to accede to the agreement if multiple closings

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 | Serial Founder & Legal AI Author

Jurisdiction

New Zealand

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Financial Services

Banking

Investment Management

Private Equity

Technology

Real Estate

Infrastructure

Manufacturing

Renewable Energy

Healthcare

Professional Services

Retail

Telecommunications

Relevant Teams

Legal

Finance

Treasury

Corporate Development

Compliance

Risk Management

Investment

Company Secretariat

Board of Directors

Mergers & Acquisitions

Relevant Roles

Chief Financial Officer

Finance Director

Investment Manager

Legal Counsel

Corporate Lawyer

Company Secretary

Treasury Manager

Investment Banker

Fund Manager

Compliance Officer

Financial Controller

Risk Manager

Corporate Development Manager

Director of Finance

Investment Analyst

Industries
Financial Markets Conduct Act 2013: Primary legislation governing financial products and services in New Zealand, including the issuance and trading of debt securities like loan notes. Covers disclosure requirements, fair dealing obligations, and licensing requirements.
Companies Act 1993: Governs corporate entities in New Zealand, including their ability to issue securities, corporate governance requirements, and directors' duties relevant to financial instruments.
Contract and Commercial Law Act 2017: Provides the fundamental framework for contract law in New Zealand, including formation, interpretation, and enforcement of contracts.
Anti-Money Laundering and Countering Financing of Terrorism Act 2009: Requires due diligence and verification procedures for financial transactions, including subscription agreements.
Financial Reporting Act 2013: Sets out financial reporting obligations for entities issuing financial products, including requirements for financial statements and auditing.
Income Tax Act 2007: Governs the tax treatment of loan notes, including withholding tax obligations and the tax implications of interest payments.
Fair Trading Act 1986: Ensures fair trading practices and prohibits misleading conduct in relation to financial products and services.
Credit Contracts and Consumer Finance Act 2003: May be relevant if the loan notes are offered to retail investors or constitute consumer credit contracts.
Personal Property Securities Act 1999: Relevant if the loan notes are secured against personal property, governing the creation and enforcement of security interests.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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