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Unsecured Convertible Promissory Note for Philippines

Unsecured Convertible Promissory Note Template for Philippines

A comprehensive debt instrument governed by Philippine law that establishes the terms and conditions for a loan that can be converted into equity shares of the borrower company. The document incorporates key provisions required under Philippine securities regulations and corporate laws, including detailed conversion mechanics, interest calculations, and regulatory compliance requirements. It balances the lender's rights to debt repayment with the potential upside of equity participation, while ensuring adherence to local banking regulations and the Securities Regulation Code of the Philippines.

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Unsecured Convertible Promissory Note

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What is a Unsecured Convertible Promissory Note?

The Unsecured Convertible Promissory Note is a vital financing instrument in the Philippine business landscape, particularly for companies seeking growth capital without immediate equity dilution. This document is typically used when a company needs funding but wants to defer equity valuation discussions, or when investors seek the security of debt with potential equity upside. It provides a framework for converting debt to equity upon specified triggers or at the holder's option, while complying with Philippine corporate law, securities regulations, and banking requirements. The note's unsecured nature makes it particularly suitable for companies with strong growth potential but limited hard assets, while the conversion feature offers investors potential participation in the company's future success.

What sections should be included in a Unsecured Convertible Promissory Note?

1. Parties: Identifies the lender(s) and borrower, including their complete legal names and addresses

2. Background: Brief context of the transaction and relationship between the parties

3. Definitions: Defines key terms used throughout the note, including financial terms, conversion-related definitions, and other technical terminology

4. Principal Amount and Interest: Specifies the loan amount, interest rate, calculation method, and payment terms

5. Maturity and Repayment: Details the maturity date and repayment obligations, including any installment provisions

6. Conversion Rights: Describes the right to convert the note into equity, including the conversion price or ratio and the timing of conversion rights

7. Conversion Mechanics: Outlines the process for exercising conversion rights, including notice requirements and documentation

8. Representations and Warranties: Standard representations from both parties regarding capacity, authority, and legal compliance

9. Events of Default: Lists circumstances constituting default and corresponding remedies

10. Notices: Specifies how formal communications between parties should be made

11. Governing Law and Jurisdiction: Establishes Philippine law as governing law and specifies jurisdiction for disputes

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

1. Security Interest: Optional provision for adding security despite being typically unsecured - used when parties later agree to add collateral

2. Automatic Conversion Triggers: Defines events triggering automatic conversion, such as qualified financing rounds - used in startup financing

3. Anti-dilution Provisions: Protects note holder's conversion rights from dilution - used when there's significant risk of share price dilution

4. Subordination: Establishes ranking of the note relative to other debt - used when there are multiple creditors

5. Board Observer Rights: Grants note holder rights to observe board meetings - used for strategic investors

6. Information Rights: Specifies financial information the borrower must provide - used for larger investments

7. Prepayment Provisions: Details terms for early repayment - used when early repayment is contemplated

What schedules should be included in a Unsecured Convertible Promissory Note?

1. Schedule A - Conversion Calculations: Detailed methodology and examples of conversion calculations

2. Schedule B - Form of Conversion Notice: Template notice for exercising conversion rights

3. Schedule C - Anti-dilution Adjustments: Formulas and examples for anti-dilution adjustments if applicable

4. Schedule D - Disclosure Schedule: Borrower's disclosures against representations and warranties

5. Appendix 1 - Corporate Authorizations: Copies of board resolutions and other corporate approvals

6. Appendix 2 - Capitalization Table: Current and post-conversion capitalization structure of the borrower

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

Financial Services

Startups

Healthcare

E-commerce

Manufacturing

Real Estate

Renewable Energy

Consumer Goods

Software Development

Biotechnology

Agricultural Technology

Relevant Teams

Legal

Finance

Treasury

Corporate Development

Compliance

Investment

Risk Management

Corporate Secretariat

Business Development

Executive Leadership

Relevant Roles

Chief Financial Officer

Corporate Lawyer

Investment Manager

Finance Director

Venture Capital Associate

Investment Banker

Corporate Secretary

Business Development Manager

Financial Controller

Treasury Manager

Legal Counsel

Compliance Officer

Company Director

Investment Analyst

Portfolio Manager

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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