Convertible Equity Agreement Template for Ireland

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Key Requirements PROMPT example:

Convertible Equity Agreement

"I need a Convertible Equity Agreement for my Irish tech startup to secure a €500,000 investment from a venture capital firm, with a 20% discount rate on future funding rounds and a €5 million valuation cap."

Document background
The Convertible Equity Agreement is a crucial financing instrument in the Irish business landscape, particularly for early-stage companies seeking flexible funding options. This document is typically used when a company wants to raise capital without immediately setting a firm valuation, offering investors the right to convert their investment into equity at a later date, usually during a subsequent funding round or upon specific triggering events. The agreement must comply with Irish corporate law, particularly the Companies Act 2014, and includes essential elements such as conversion mechanisms, valuation parameters, investor rights, and protective provisions. It's particularly valuable for startups and scale-ups as it allows them to defer valuation discussions while providing investors with potential upside through future equity participation.
Suggested Sections

1. Parties: Identification of the company and the investor(s), including full legal names and registered addresses

2. Background: Context of the agreement, including the company's business and the investor's intention to invest

3. Definitions: Definitions of key terms used throughout the agreement, including financial terms, conversion-related terminology, and corporate events

4. Investment Amount: Details of the investment amount and payment terms

5. Conversion Rights: Terms and conditions under which the investment converts to equity, including automatic and optional conversion provisions

6. Conversion Price: Methodology for determining the price at which the investment converts to equity, including any discount rates or valuation caps

7. Qualifying Events: Definition and details of events that trigger automatic conversion, such as qualified financing rounds

8. Pre-emptive Rights: Investor's rights to participate in future funding rounds

9. Information Rights: Investor's rights to receive financial and other company information

10. Company Covenants: Company's obligations and restrictions during the term of the agreement

11. Representations and Warranties: Standard representations and warranties from both the company and the investor

12. Termination: Circumstances under which the agreement can be terminated and the consequences

13. Governing Law and Jurisdiction: Specification of Irish law as governing law and jurisdiction for disputes

14. General Provisions: Standard boilerplate provisions including notices, amendments, and assignment

Optional Sections

1. Most Favored Nation: Provision ensuring the investor receives the benefit of more favorable terms granted to subsequent investors, used when dealing with sophisticated investors

2. Board Observer Rights: Rights of the investor to appoint a board observer, typically included for larger investments

3. Anti-dilution Protection: Protection against dilution in certain circumstances, often requested by lead investors

4. Tag-Along Rights: Rights to participate in sale of shares by other shareholders, included for significant investments

5. Drag-Along Rights: Company's right to force investor participation in a sale, included when company wants exit flexibility

6. Confidentiality: Detailed confidentiality provisions, included when standard general provisions are insufficient

7. Intellectual Property Protection: Additional IP-related provisions, important for technology companies

8. Founder Commitments: Specific commitments from founders, included when investor requires founder lock-in

Suggested Schedules

1. Schedule 1 - Company Details: Detailed information about the company including capitalization table and corporate structure

2. Schedule 2 - Investment Terms: Detailed terms of the investment including valuation methodology and conversion mechanics

3. Schedule 3 - Conditions Precedent: List of conditions that must be satisfied before investment completion

4. Schedule 4 - Form of Conversion Notice: Template notice for exercising conversion rights

5. Schedule 5 - Reserved Matters: List of actions requiring investor consent

6. Schedule 6 - Warranties: Detailed warranties given by the company and founders

7. Appendix A - Financial Statements: Recent financial statements of the company

8. Appendix B - Business Plan: Company's current business plan and financial projections

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

Technology

Software

Biotechnology

Financial Services

Healthcare

E-commerce

Clean Technology

Manufacturing

Media and Entertainment

Consumer Products

Professional Services

Real Estate Technology

Education Technology

Agricultural Technology

Relevant Teams

Legal

Finance

Corporate Development

Executive Leadership

Board of Directors

Investment

Compliance

Company Secretariat

Treasury

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Chief Legal Officer

Investment Director

Corporate Lawyer

Financial Controller

Company Secretary

Board Director

Investment Manager

Venture Capital Partner

Angel Investor

Corporate Development Manager

Finance Director

Business Development Director

Compliance Officer

Industries
Companies Act 2014: The primary legislation governing company law in Ireland, covering company formation, share capital, corporate governance, and shareholder rights. Particularly relevant for provisions regarding share issuance, transfer of shares, and alteration of share capital.
Investment Intermediaries Act 1995: Regulates investment business firms and financial instruments in Ireland. Relevant for ensuring compliance with investment regulations when structuring the convertible equity instrument.
Taxes Consolidation Act 1997: Contains provisions regarding taxation of share issues, transfers, and conversions. Important for understanding tax implications of the equity conversion process.
European Communities (Markets in Financial Instruments) Regulations 2017: Implements MiFID II in Ireland, relevant for financial instruments and investment services. May apply depending on the nature and structure of the convertible equity agreement.
Contract Law (Various Acts): Including common law principles and various statutes governing contract formation, validity, and enforcement in Ireland.
Consumer Protection Code 2012: May be relevant if any party to the agreement is considered a consumer under Irish law, ensuring proper disclosures and protections.
Central Bank Act 1942 (as amended): Relevant for understanding regulatory oversight and compliance requirements for financial instruments and investments.
Companies (Accounting) Act 2017: Contains provisions regarding financial reporting and disclosure requirements that may affect how the convertible equity is recorded and reported.
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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