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The Convertible Loan Agreement Startup is a critical financing instrument in the Canadian startup ecosystem, typically used when a company needs bridge financing before a larger equity funding round or when valuation determination is premature. This document provides a structured framework for debt that can convert into equity, usually at a discount to the next qualified financing round. It must comply with Canadian federal and provincial securities laws, corporate regulations, and interest rate restrictions. The agreement includes essential elements such as conversion triggers, valuation caps, discount rates, and investor protections, while ensuring compliance with Canadian securities regulations and corporate law requirements. It's particularly useful for early-stage companies seeking to defer valuation discussions while accessing necessary capital, while providing investors with potential upside through future equity conversion rights.
