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Convertible Promissory Note for Philippines

Convertible Promissory Note Template for Philippines

A comprehensive legal document governed by Philippine law that establishes a debt instrument which can be converted into equity shares of the issuing company under specified conditions. The document details the loan amount, interest rate, maturity date, conversion mechanisms, and triggers for conversion, while ensuring compliance with Philippine securities regulations and corporate laws. It includes provisions for both mandatory and optional conversion events, investor protections, and company obligations, structured to accommodate the unique requirements of the Philippine business environment and regulatory framework.

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Convertible Promissory Note

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What is a Convertible Promissory Note?

The Convertible Promissory Note is a strategic financing instrument widely used in the Philippine business landscape, particularly for startups and growing companies seeking initial or bridge financing. This document serves as a hybrid instrument that begins as debt but can convert into equity, typically during future financing rounds or specific trigger events. It is especially valuable in the Philippine context where companies need flexible financing options while navigating local regulatory requirements. The document includes essential elements such as principal amount, interest rate, maturity date, conversion mechanisms, and investor protections, all structured to comply with Philippine securities laws, the Revised Corporation Code, and other relevant regulations. This type of agreement is particularly useful when the company's valuation is difficult to determine or when parties wish to defer valuation discussions to a future date.

What sections should be included in a Convertible Promissory Note?

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

2. Background: Context of the investment, including the company's business and purpose of the financing

3. Definitions: Key terms used throughout the document, including financial terms, conversion-related definitions, and other technical terminology

4. Principal Amount and Interest: Specification of the loan amount, interest rate, and interest calculation method

5. Maturity Date: The date when the principal and accrued interest become due if not converted

6. Conversion Rights: Terms and conditions for converting the note into equity, including conversion price or mechanism

7. Conversion Mechanics: Detailed process for executing the conversion, including notices and documentation requirements

8. Events of Default: Circumstances that constitute default and consequences thereof

9. Representations and Warranties: Standard declarations by the company regarding its legal status, authority, and business condition

10. Covenants: Ongoing obligations of the company during the term of the note

11. Assignment and Transfer: Terms governing the transfer of the note to other parties

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

13. Notices: Process for formal communications between parties

14. Signature Page: Execution block for all parties

What sections are optional to include in a Convertible Promissory Note?

1. Qualified Financing Conversion: Used when automatic conversion is triggered by a qualified financing round, defining the qualifying amount and terms

2. Change of Control Provisions: Include when specific rights or obligations arise upon a change in company control

3. Most Favored Nation Clause: Optional protection ensuring the noteholder receives the best terms offered to other investors

4. Pre-emptive Rights: Rights of the noteholder to participate in future financing rounds

5. Information Rights: Rights of the noteholder to receive company financial information and reports

6. Foreign Investment Provisions: Required when the noteholder is a foreign investor, addressing compliance with Philippine foreign investment laws

7. Tax Provisions: Detailed tax treatment and withholding requirements, particularly relevant for cross-border investments

8. Security Interest: Include if the note is secured by company assets

What schedules should be included in a Convertible Promissory Note?

1. Schedule A - Conversion Terms: Detailed methodology for calculating conversion price and number of shares

2. Schedule B - Form of Conversion Notice: Template for noteholder to exercise conversion rights

3. Schedule C - Corporate Information: Company details including capitalization table and corporate structure

4. Schedule D - Relevant Corporate Approvals: Copies of board and shareholder resolutions authorizing the note

5. Appendix 1 - Deed of Accession: Form for noteholder to accede to existing shareholders' agreement upon conversion

6. Appendix 2 - Disclosure Schedule: Company disclosures related to representations and warranties

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Philippines

Publisher

Ƶ

Document Type

Promissory Note

Sector

Banking

Cost

Free to use
Relevant legal definitions










Clauses

































Relevant Industries

Technology Startups

Financial Services

E-commerce

Healthcare Technology

Fintech

Software Development

Manufacturing

Renewable Energy

Agricultural Technology

Digital Services

Biotechnology

Real Estate Technology

Relevant Teams

Legal

Finance

Corporate Secretarial

Compliance

Treasury

Executive Management

Business Development

Investment

Corporate Development

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Corporate Lawyer

Investment Manager

Venture Capital Associate

Finance Director

Corporate Secretary

Legal Counsel

Investment Banker

Startup Founder

Business Development Director

Company Director

Compliance Officer

Treasury Manager

Angel Investor

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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