Document background
The Convertible Loan Agreement serves as a crucial financing instrument in the Philippine business landscape, particularly for emerging companies seeking growth capital. This document is typically used when investors want to provide funding with the flexibility to convert their loan into equity shares at a later date, usually upon specific trigger events such as future funding rounds or exits. It offers advantages for both parties: the company secures immediate funding while deferring valuation discussions, and investors gain downside protection of a loan with potential equity upside. The agreement must comply with Philippine regulations, including the Securities Regulation Code, General Banking Law, and Revised Corporation Code, particularly regarding interest rates, securities regulations, and corporate governance requirements. It's especially relevant for startup funding, bridge financing, and strategic investments where immediate equity valuation may be challenging or premature.
