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Convertible Loan Agreement

Convertible Loan Agreement Template for South Africa

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Key Requirements PROMPT example:

Convertible Loan Agreement

"I need a Convertible Loan Agreement for a R5 million investment into my South African tech startup, with conversion triggered at a R50 million valuation cap and automatic conversion upon a Series A funding round by March 2025."

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Document background
The Convertible Loan Agreement is a sophisticated financing instrument commonly used in South Africa for companies seeking growth capital or bridge financing. It provides a hybrid solution that initially functions as a debt instrument but can transform into equity investment under predetermined conditions. This type of agreement is particularly valuable for startups and growing companies that need immediate funding but may not yet have established a clear company valuation. The document must comply with South African corporate law, financial regulations, and tax requirements, including the Companies Act 71 of 2008 and relevant financial sector regulations. It typically includes detailed provisions for loan terms, conversion mechanisms, company valuation methods, and shareholder rights post-conversion. The agreement is especially popular in the technology and innovation sectors where company valuations can be challenging at early stages.
Suggested Sections

1. Parties: Identification of the Lender and Borrower with their full legal details

2. Background: Context of the agreement, including the purpose of the loan and the parties' intention regarding potential conversion

3. Definitions and Interpretation: Definitions of key terms used throughout the agreement and rules of interpretation

4. Loan Amount and Disbursement: Details of the loan amount, disbursement conditions, and drawdown procedures

5. Interest: Interest rate, calculation method, and payment terms

6. Repayment Terms: Repayment schedule, methods, and prepayment provisions

7. Conversion Rights: Terms and conditions for converting the loan into equity, including trigger events and conversion price/mechanism

8. Conversion Procedure: Step-by-step process for executing the conversion

9. Representations and Warranties: Statements of fact and assurances from both parties

10. Borrower Covenants: Ongoing obligations of the borrower during the loan term

11. Events of Default: Circumstances constituting default and consequences

12. Remedies: Rights and remedies available to parties in case of breach or default

13. Boilerplate Provisions: Standard legal provisions including notices, governing law, and jurisdiction

Optional Sections

1. Security: Include when the loan is secured by specific assets or guarantees

2. Information Rights: Add when lender requires specific reporting or information access rights

3. Anti-dilution Protection: Include when protection against share dilution post-conversion is needed

4. Tag-Along Rights: Add when lender requires the right to join in sale of shares post-conversion

5. Board Representation: Include when lender requires board representation rights post-conversion

6. Change of Control Provisions: Add when specific provisions for change in company control are needed

7. Subordination: Include when the loan needs to be subordinated to other debt

8. Foreign Exchange Provisions: Add when dealing with cross-border transactions

Suggested Schedules

1. Loan Details Schedule: Detailed terms of the loan including amount, interest rate, and payment schedule

2. Conversion Mechanism: Detailed calculation method for conversion price and number of shares

3. Form of Conversion Notice: Template notice for exercising conversion rights

4. Company Information: Key company details including capital structure and existing securities

5. Conditions Precedent: List of conditions to be satisfied before loan disbursement

6. Security Details: Details of any security or collateral (if applicable)

7. Required Consents and Approvals: List of necessary regulatory and corporate approvals

8. Disclosure Schedule: Exceptions to representations and warranties

Authors

Alex Denne

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

alex.den.21@genieai.co
Relevant legal definitions







































Clauses

































Relevant Industries

Technology Startups

Financial Services

Venture Capital

Private Equity

Manufacturing

E-commerce

Healthcare

Renewable Energy

Mining

Agriculture

Real Estate

Professional Services

Retail

Digital Media

Telecommunications

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Compliance

Risk Management

Investment

Corporate Secretariat

Executive Leadership

Business Development

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Finance Director

Investment Manager

Legal Counsel

Corporate Lawyer

Investment Banker

Venture Capital Partner

Private Equity Manager

Company Secretary

Financial Controller

Business Development Director

Startup Founder

Portfolio Manager

Risk Manager

Compliance Officer

Treasury 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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