Convertible Agreement Template for Pakistan

A Convertible Agreement lets early-stage Pakistani startups raise funds while delaying the complex task of company valuation. It works like an advance that automatically converts into equity shares when specific triggers occur, such as a major funding round or acquisition.

Under Pakistani securities law, these agreements give investors a future stake in the company, usually at a discount to the next round's share price. They've become popular among local angel investors and incubators because they're simpler than traditional equity deals and protect both founders and investors during the uncertain early stages of a business.

Consider a Convertible Agreement when your Pakistani startup needs quick funding but you're not ready to set a firm company valuation. This works especially well for tech companies and innovative ventures where early-stage valuation is challenging, or when you need to close a funding round faster than a traditional equity deal allows.

The agreement makes sense when your investors are comfortable with future equity rather than immediate shares. It's particularly useful during seed rounds, bridge financing, or when working with angel investors who understand the local startup ecosystem. Just ensure compliance with SECP regulations on securities and corporate finance.

• Standard Convertible Note: Most common in Pakistani startups, featuring basic conversion terms and a simple valuation cap
• SAFE Agreement: Simplified version without interest rates or maturity dates, popular among tech incubators
• Bridge Note: Used for short-term funding with specific maturity dates and higher interest rates
• Discount-Only Agreement: Offers conversion at a set discount to the next round's price, without a valuation cap
• Capped Convertible: Includes both a valuation cap and discount rate, providing maximum investor protection under SECP guidelines

• Startup Founders: Create and negotiate Convertible Agreements to secure early-stage funding without immediate equity dilution
• Angel Investors: Provide capital through these agreements, typically investing between PKR 1-10 million in emerging companies
• Corporate Lawyers: Draft and review agreements to ensure SECP compliance and protect both parties' interests
• Business Incubators: Use standardized convertible templates when funding multiple startups in their programs
• Financial Advisors: Guide both founders and investors on terms, valuation caps, and conversion triggers

• Company Details: Gather complete incorporation documents, SECP registration, and tax records
• Investment Terms: Define investment amount, valuation cap, discount rate, and conversion triggers
• Investor Information: Collect KYC documents, investment history, and proof of funds
• Timeline Planning: Set clear maturity dates, future funding milestones, and conversion deadlines
• Compliance Check: Review current SECP regulations on convertible instruments and securities laws
• Documentation: Use our platform to generate a legally-sound Convertible Agreement template, customized to your specific needs

• Investment Terms: Clear statement of investment amount, valuation cap, and discount rate
• Conversion Mechanics: Detailed triggers, calculation methods, and share class specifications
• Party Information: Complete legal names, addresses, and registration details of company and investor
• Rights and Obligations: Information rights, pro-rata rights, and voting provisions
• SECP Compliance: Mandatory disclosures and regulatory declarations under Pakistani law
• Governing Law: Explicit choice of Pakistani law and jurisdiction for dispute resolution
• Signatures: Proper execution blocks for authorized representatives with witness requirements

A Convertible Agreement differs significantly from a Business Acquisition Agreement in several key ways. While both involve company ownership changes, their timing, purpose, and structure serve distinct needs in Pakistan's business landscape. Let's explore the main differences:

• Investment Stage: Convertible Agreements typically handle early-stage startup funding, while Business Acquisition Agreement manages complete or partial company purchases
• Valuation Approach: Convertible Agreements deliberately delay valuation until a future date, whereas Business Acquisition Agreements require immediate, definitive company valuation
• Transaction Complexity: Convertible Agreements are simpler, focusing mainly on future equity rights. Business Acquisition Agreements involve comprehensive due diligence, asset transfers, and immediate ownership changes
• Risk Profile: Convertible Agreements carry uncertainty about future share prices and conversion terms, while Business Acquisition Agreements provide immediate clarity on ownership and price