Compulsory Convertible Debentures Agreement Template for England and Wales

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Key Requirements PROMPT example:

Compulsory Convertible Debentures Agreement

"Need a Compulsory Convertible Debentures Agreement for a Series B funding round where we're raising £5M from three institutional investors, with mandatory conversion triggered at a £50M company valuation or by March 2025, whichever comes first."

Document background
A Compulsory Convertible Debentures Agreement is utilized when companies seek to raise capital while providing investors with assured equity participation in the future. This instrument, governed by English and Welsh law, combines elements of debt and equity financing, offering interim interest payments with mandatory conversion into shares. The agreement is particularly valuable for companies in growth phases or those seeking to optimize their capital structure while managing their immediate debt obligations. It includes detailed provisions on conversion mechanics, valuation methods, timing triggers, and investor protections, all within the framework of UK financial regulations and company law.
Suggested Sections

1. Parties: Identification of issuer and debenture holders

2. Background: Context of the debenture issuance and key commercial terms

3. Definitions: Key terms used throughout the agreement

4. Issue and Status of Debentures: Terms of issuance, face value, and ranking of debentures

5. Conversion Terms: Mandatory conversion triggers, conversion ratio, and mechanism

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

7. Security: Details of any security provided for the debentures

8. Covenants: Issuer's obligations and restrictions

9. Events of Default: Circumstances constituting default and consequences

Optional Sections

1. Transfer Restrictions: Limitations on transfer of debentures (used when transferability needs to be restricted)

2. Tax Provisions: Tax treatment and withholding obligations (used when specific tax considerations apply)

3. Anti-dilution Provisions: Protections against share dilution (used when additional shareholder protections are required)

Suggested Schedules

1. Form of Debenture Certificate: Template of the physical debenture certificate

2. Conversion Notice: Form of notice for initiating conversion

3. Security Documents: Details of security arrangements if applicable

4. Calculation Methods: Detailed formulae for conversion and interest calculations

5. Corporate Authorizations: Relevant board and shareholder resolutions

Authors

Alex Denne

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

Relevant legal definitions
Clauses
Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company operations, including provisions for share capital, debentures, registration of charges, company resolutions, and directors' duties and powers

Financial Services and Markets Act 2000: Key legislation covering financial promotion restrictions, regulated activities provisions, and prospectus requirements for financial instruments

Financial Services Act 2012: Legislation governing financial conduct regulations and market abuse provisions in financial markets

FCA Regulations: Regulatory framework including Listing Rules, Disclosure and Transparency Rules, and Prospectus Rules, particularly relevant for listed companies

Companies House Requirements: Statutory requirements for registration of charges and filing requirements related to company documentation

Income Tax Act 2007: Tax legislation relevant for treatment of interest payments and conversion of debentures

Corporation Tax Act 2009: Tax legislation governing corporate aspects of debenture issuance and conversion

Taxation of Chargeable Gains Act 1992: Tax legislation covering capital gains implications of debenture conversion

Insolvency Act 1986: Legislation governing creditor rights and company insolvency proceedings relevant to debenture holders

Common Law Contract Principles: Fundamental contract law principles under English common law affecting the formation and enforcement of debenture agreements

Retained EU Law: Relevant European Union laws that have been retained in UK law post-Brexit affecting financial instruments and securities

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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