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The Convertible Agreement Regarding Equity (CARE) is a strategic financing instrument commonly used in the South African market for early-stage companies seeking capital without immediate equity dilution. This document is particularly valuable when a company's valuation is difficult to determine or when parties prefer to defer valuation discussions to a future funding round. It provides a structured framework for investment that can later convert into equity, typically triggered by specific events such as qualified financing rounds or exits. The agreement must comply with South African corporate law, particularly the Companies Act 71 of 2008, and consider exchange control regulations when foreign investors are involved. It includes essential provisions for conversion mechanics, investor protections, and company obligations, making it a preferred choice for startups and growth-stage companies seeking flexible funding options.

1. Parties: Identification of the Company and the Investor(s), including their full legal names, registration numbers, and addresses

2. Background: Context of the agreement, including the company's business and the investor's intention to provide funding with the possibility of future equity conversion

3. Definitions and Interpretation: Key terms used throughout the agreement, including financial terms, conversion-related definitions, and interpretation rules

4. Investment Amount: Details of the investment amount, payment terms, and conditions precedent to investment

5. Conversion Rights: Terms and conditions under which the investment amount can be converted into equity, including conversion price and mechanisms

6. Conversion Triggers: Specific events that trigger automatic or optional conversion, including qualified financing rounds, exits, or maturity

7. Company Representations and Warranties: Company's statements regarding its legal status, authority, and business condition

8. Investor Representations and Warranties: Investor's statements regarding their investment capacity and compliance with applicable laws

9. Information Rights: Investor's rights to receive company information and financial reports

10. Most Favored Nation Provision: Protection ensuring the investor receives the best terms offered to other investors

11. Governing Law and Jurisdiction: Specification of South African law as governing law and jurisdiction for disputes

12. General Provisions: Standard contractual provisions including notices, amendments, and assignment rights