The Convertible Equity Agreement is a crucial instrument in the Philippine startup and growth company ecosystem, commonly used when companies seek early-stage investment but face challenges in determining precise equity valuation. This document type, while following Philippine corporate and securities laws, provides a structured framework for investors to fund companies with the right to convert their investment into equity shares at a later date, usually during a qualified financing round or upon reaching specific milestones. The agreement includes essential provisions for investment terms, conversion mechanisms, investor rights, and compliance requirements under Philippine law, making it particularly suitable for startups and growing companies seeking flexible funding solutions without immediate dilution of founder equity. The document addresses key aspects such as conversion price calculations, investor protections, information rights, and governance provisions, all within the context of Philippine legal requirements.
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1. Parties: Identification of the Company, the Investor(s), and any other relevant parties
2. Background: Context of the investment and purpose of the agreement
3. Definitions: Defined terms used throughout the agreement
4. Investment Amount and Terms: Details of the initial investment, including amount, payment terms, and use of proceeds
5. Conversion Rights: Conditions and mechanisms for converting the investment into equity
6. Conversion Price and Valuation: Formula and methodology for determining conversion price and company valuation
7. Company Representations and Warranties: Company's statements about its legal status, financial condition, and business
8. Investor Representations and Warranties: Investor's statements about their investment capacity and compliance
9. Information Rights: Investor's rights to receive financial and operational information
10. Corporate Governance: Management participation rights and decision-making processes
11. Transfer Restrictions: Limitations on transfer of rights under the agreement
12. Events of Default: Circumstances constituting default and consequences
13. Termination: Conditions and process for terminating the agreement
14. Governing Law and Jurisdiction: Application of Philippine law and dispute resolution mechanisms
1. Anti-Dilution Protection: Protection against dilution of conversion rights, used when specifically negotiated
2. Tag-Along Rights: Right to join in sale of shares, included when requested by investors
3. Drag-Along Rights: Right to force investor participation in sale, included for company protection
4. Pre-emptive Rights: Right to maintain percentage ownership in future rounds, optional investor protection
5. Foreign Ownership Compliance: Special provisions for foreign investors, required only with foreign investment
6. Multiple Closing Provisions: For investments with multiple tranches or investors
7. Board Appointment Rights: Investor rights to board representation, included for larger investments
8. Founders' Commitments: Specific obligations of founders, included when founder involvement is crucial
1. Schedule A - Capitalization Table: Current and post-conversion cap table of the company
2. Schedule B - Investment Amount Details: Breakdown of investment amount and payment schedule
3. Schedule C - Conversion Calculations: Detailed formulas and examples of conversion calculations
4. Schedule D - Company Information: Key company details, including registration and shareholders
5. Schedule E - Disclosure Schedule: Exceptions to representations and warranties
6. Appendix 1 - Form of Conversion Notice: Template for exercising conversion rights
7. Appendix 2 - Required Corporate Actions: List of corporate actions needed for conversion
8. Appendix 3 - Compliance Certificates: Templates for required compliance certifications
Relevant legal definitions
Clauses
Relevant Industries
Technology
Financial Services
E-commerce
Healthcare
Manufacturing
Renewable Energy
Agriculture Technology
Education Technology
Real Estate
Consumer Services
Business Services
Media and Entertainment
Telecommunications
Biotechnology
Retail
Relevant Teams
Legal
Finance
Corporate Development
Compliance
Executive Leadership
Investment
Corporate Secretarial
Business Development
Risk Management
Relevant Roles
Chief Executive Officer
Chief Financial Officer
Investment Manager
Corporate Lawyer
Legal Counsel
Investment Director
Venture Capital Associate
Angel Investor
Company Secretary
Corporate Development Manager
Finance Director
Startup Founder
Business Development Director
Managing Partner
Investment Analyst
Compliance Officer
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