Convertible Note Contract Generator for England and Wales

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Key Requirements PROMPT example:

Convertible Note Contract

"I need a Convertible Note Contract for my UK-based tech startup to secure £500,000 in bridge financing, with a 20% discount rate on conversion and a valuation cap of £5 million, to be issued by March 2025."

Document background
The Convertible Note Contract is commonly used in early-stage financing where company valuation may be difficult to determine. Under English and Welsh law, this instrument provides flexibility for both investors and companies, offering debt-like protection with equity upside potential. Typically used for bridge financing or seed rounds, it includes key terms such as conversion triggers, valuation caps, and discount rates. The document balances investor protection with company interests, incorporating both mandatory debt elements and conditional equity features.
Suggested Sections

1. Parties: Identification of the issuer and noteholder(s)

2. Background: Context and purpose of the convertible note

3. Definitions: Key terms used throughout the agreement

4. Subscription: Terms of the note subscription including amount and payment

5. Interest: Interest rate and payment terms

6. Conversion Rights: Terms and conditions for converting the note to equity

7. Repayment: Terms for repayment if conversion doesn't occur

8. Events of Default: Circumstances constituting default and consequences

Optional Sections

1. Security: Terms of any security provided for the note - used when the note is secured against assets

2. Transferability: Provisions regarding transfer of the note - used when transfer rights need to be restricted or defined

3. Information Rights: Rights of noteholder to company information - used when noteholder requires specific information access

4. Tag-Along Rights: Rights to participate in sale of company shares - used when providing additional investor protections

Suggested Schedules

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

2. Calculation of Conversion Price: Detailed methodology for calculating conversion price

3. Cap Table: Current and post-conversion shareholding structure

4. Company Information: Key company details and financial information

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
Industries

Companies Act 2006: Primary legislation governing company operations, including share capital, issuance, directors' duties, company registration requirements, and restrictions on financial assistance

Financial Services and Markets Act 2000 (FSMA): Regulates financial services and markets, covering financial promotion restrictions, regulated activities provisions, and investment restrictions

Consumer Credit Act 1974: Governs consumer credit arrangements, including licensing requirements and consumer protection provisions that may apply to certain convertible notes

FSMA (Regulated Activities) Order 2001: Defines investments and regulated activities, including relevant exemptions and restrictions for financial instruments

FCA Regulations: Regulatory framework from the Financial Conduct Authority covering compliance requirements for regulated investment products and financial instruments

Contract Law Framework: Includes Law of Property (Miscellaneous Provisions) Act 1989, common law principles of contract formation, and Unfair Contract Terms Act 1977

Tax Legislation: Encompasses Corporation Tax Act 2009, Income Tax Act 2007, taxation of interest payments, and Stamp Duty considerations

Insolvency Act 1986: Covers creditor rights, priority of claims, and security arrangements in case of insolvency

Money Laundering Regulations 2017: Establishes due diligence requirements and reporting obligations for financial transactions and investments

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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