Convertible Notes Agreement Template for Philippines

The Convertible Notes Agreement serves as a crucial financing instrument in the Philippine business landscape, particularly for startups and growing companies seeking to raise capital without immediately setting a valuation. This document is typically used when companies need bridge financing or want to defer valuation discussions to a later funding round. The agreement must comply with Philippine securities laws, including the Securities Regulation Code and Revised Corporation Code, while addressing foreign investment restrictions if applicable. It comprehensively covers investment terms, conversion mechanisms, investor rights, and company obligations, providing a balanced framework for both parties. Companies often utilize this instrument in pre-Series A rounds or when traditional equity financing might be premature or impractical.

1. Parties: Identification of the Issuer (Company) and the Noteholder(s), including their complete legal names and addresses

2. Background: Context of the investment, company's business, and purpose of the convertible note issuance

3. Definitions: Definitions of key terms used throughout the agreement, including financial terms, conversion mechanisms, and technical terminology

4. Subscription and Issue: Details of the note subscription, including principal amount, issue date, and payment terms

5. Interest: Interest rate, calculation method, payment frequency, and treatment of accrued interest upon conversion

6. Maturity and Repayment: Maturity date, repayment terms, and conditions for extension if applicable

7. Conversion Rights: Conversion mechanism, timing, price or discount rate, and processes for executing conversion

8. Qualifying Financing: Definition and terms of qualifying financing events that trigger automatic conversion

9. Company Representations and Warranties: Company's statements about its legal status, authority, and business condition

10. Noteholder Representations and Warranties: Noteholder's statements about investment capacity and compliance with securities laws

11. Information Rights: Noteholder's rights to receive financial and other company information

12. Events of Default: Circumstances constituting default and consequences thereof

13. Transferability: Terms governing the transfer of notes to other parties

14. Notices: Process for formal communications between parties

15. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction for disputes

16. General Provisions: Standard contractual provisions including amendments, waivers, and severability