Loan Conversion To Equity Agreement Template for Singapore

A Loan Conversion to Equity Agreement under Singapore law is a legal document that facilitates the transformation of an existing debt obligation into equity ownership in the borrower company. This agreement, governed by Singapore's Companies Act and Securities and Futures Act, outlines the terms, conditions, and mechanics of converting the outstanding loan amount into shares, including valuation methods, conversion ratios, and completion procedures. It incorporates necessary compliance with Singapore's corporate and securities regulations while protecting both lender and borrower interests.

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What is a Loan Conversion To Equity Agreement?

The Loan Conversion To Equity Agreement is typically used when a company and its lender agree to transform debt obligations into ownership stakes, often as part of financial restructuring or planned investment strategy. Under Singapore's legal framework, this document must comply with strict corporate governance requirements and securities regulations. The agreement details the conversion mechanism, share valuation, regulatory compliance, and protects both parties' interests through carefully structured terms and conditions. It's particularly relevant in startup funding rounds, corporate restructuring, and strategic investments where debt-to-equity conversion presents mutual benefits for both lender and borrower.

What sections should be included in a Loan Conversion To Equity Agreement?

1. Parties: Identification of the lender, borrower, and any guarantors

2. Background: Details of the original loan and circumstances leading to conversion

3. Definitions: Key terms used throughout the agreement

4. Conversion Terms: Specific conditions and mechanics of converting debt to equity

5. Conversion Price/Ratio: Formula or fixed terms for calculating conversion value

6. Representations and Warranties: Statements of fact by both parties regarding their capacity, authority, and compliance

7. Completion Mechanics: Process and timing of conversion completion

8. Governing Law and Jurisdiction: Specification of Singapore law as governing law and jurisdiction for disputes

What sections are optional to include in a Loan Conversion To Equity Agreement?

1. Anti-dilution Provisions: Protection mechanisms against future dilution of converted shares

2. Board Appointment Rights: Rights of the converting lender to appoint board members post-conversion

3. Tag-Along Rights: Rights of minority shareholders to join in sale of majority shares

4. Pre-emptive Rights: Rights of existing shareholders to maintain their percentage ownership in future share issues

5. Drag-Along Rights: Rights of majority shareholders to force minority shareholders to join in sale of company

What schedules should be included in a Loan Conversion To Equity Agreement?

1. Original Loan Agreement: Copy of the original loan documentation being converted

2. Conversion Calculations: Detailed methodology and calculations for the debt-to-equity conversion

3. Share Certificate Form: Template for new share certificates to be issued upon conversion

4. Board Resolutions: Corporate approvals and resolutions authorizing the conversion

5. Shareholders' Agreement: New or amended shareholders' agreement reflecting post-conversion arrangements

6. Company Constitution: Current constitution of the company showing share capital structure

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

Singapore

Publisher

Genie AI

Cost

Free to use

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