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The Convertible Equity Agreement is a crucial instrument in the Australian startup and growth company ecosystem, typically used when companies seek early-stage investment while deferring formal valuation. This document is particularly valuable when a company needs immediate funding but determining a precise valuation is premature or impractical. It provides investors with the right to convert their investment into equity shares at a future date, usually during a qualifying funding round or exit event. The agreement must comply with Australian corporate law, including the Corporations Act 2001 and ASIC regulations, and typically includes provisions for conversion mechanics, valuation caps, discount rates, and investor rights. It's commonly used by startups and scale-ups raising seed or bridge funding, offering a balance between investor protection and company flexibility while avoiding immediate dilution of founder equity.
