Convertible Loan Agreement Startup Template for Australia

The Convertible Loan Agreement Startup is a crucial financing instrument in the Australian startup ecosystem, typically used when companies need bridge financing or want to delay setting a formal valuation. This document is designed for use by Australian startups seeking investment from sophisticated investors, providing a debt-to-equity conversion mechanism that aligns with Australian corporate law and ASIC requirements. It's particularly valuable for early-stage companies raising capital between formal funding rounds or when a quick closing is desired. The agreement includes essential elements such as loan terms, conversion mechanics, interest provisions, and investor protections, while maintaining compliance with Australian securities laws and corporate regulations. It's structured to accommodate future equity rounds and potential exit events, making it a flexible funding tool for growing startups.

1. Parties: Identification of the lender, borrower (company), and any guarantors

2. Background: Context of the agreement, including company status and purpose of the convertible loan

3. Definitions and Interpretation: Definitions of key terms including Conversion Price, Qualifying Financing, Exit Event, Maturity Date, and interpretation clauses

4. Loan Terms: Amount, drawdown conditions, purpose, and any tranching arrangements

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

6. Repayment: Repayment terms, early repayment rights, and mandatory repayment events

7. Conversion Rights: Conversion mechanics, timing, and pricing, including automatic and optional conversion triggers

8. Conversion Mechanics: Detailed process for conversion, including notice requirements and share issuance

9. Company Warranties: Standard company warranties about its status, capacity, and authority

10. Lender Warranties: Warranties from lender regarding capacity and sophistication

11. Company Undertakings: Ongoing obligations of the company during the loan term

12. Events of Default: Circumstances constituting default and consequences

13. Representations and Warranties: General representations and warranties from all parties

14. Confidentiality: Obligations regarding confidential information

15. Notices: Process for giving formal notices under the agreement

16. General Provisions: Standard boilerplate clauses including assignment, amendments, governing law