As a business owner or investor in Singapore, you may have come across the term “convertible note agreement”. This legal document is used in funding rounds and is a popular instrument for startups and early-stage companies.
A convertible note is a type of debt instrument that can be converted into equity in the future. It allows the investor to loan money to the company and receive a future equity stake while deferring valuation until a later date. This is beneficial for both the investor and the company as it allows for a flexible and efficient funding mechanism.
If you are considering using a convertible note agreement for your business, having a template can be a helpful starting point. Here are some key elements that should be included in a convertible note agreement template in Singapore:
1. Parties involved: The agreement should clearly identify the parties involved in the transaction, including the investor and the company.
2. Principal amount and interest rate: The principal amount should be clearly stated along with any interest rate that will be applied to the loan.
3. Maturity date: This is the date when the loan must be repaid, or when the note will convert into equity.
4. Conversion terms: The agreement should outline the terms of converting the note into equity, including the conversion price and any discounts or caps that may apply.
5. Representations and warranties: Both the investor and the company should make certain representations and warranties about their respective abilities to enter into the agreement.
6. Governing law: The agreement should specify which laws will govern the transaction and any disputes that may arise.
7. Signatures: Lastly, the agreement should be signed by both parties to show their agreement to the terms outlined in the document.
Having a convertible note agreement template can save time and ensure that all necessary elements are included. However, it is important to note that every situation is unique and may require additional or different terms to be included in the agreement. It is always advisable to consult with a lawyer before finalizing any legal document.
In summary, a convertible note agreement can be a useful financing tool for startups and early-stage companies in Singapore. By using a template, you can ensure that all necessary elements are included. However, it is important to seek legal advice before finalizing any document to ensure that it meets your specific needs and requirements.