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Debt To Equity Conversion Agreement

Debt To Equity Conversion Agreement Template for India

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Key Requirements PROMPT example:

Debt To Equity Conversion Agreement

"Need a Debt to Equity Conversion Agreement for converting a 50 million INR loan from ABC Bank Limited into equity shares of my Indian technology startup, with the conversion to be completed by March 2025 at a pre-agreed valuation of 200 million INR."

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Document background
The Debt to Equity Conversion Agreement is a crucial instrument in corporate debt restructuring and financial reorganization under Indian law. It is typically used when a company seeks to improve its balance sheet by reducing debt obligations and strengthening its equity base, or when creditors agree to convert their debt claims into ownership stakes. The document becomes relevant in various scenarios including corporate debt restructuring, strategic financial planning, or as part of insolvency resolution processes. The agreement must comply with multiple regulatory frameworks including the Companies Act 2013, SEBI regulations, and RBI guidelines, particularly regarding share issuance, foreign investment (if applicable), and corporate governance requirements. It contains detailed provisions about the debt being converted, valuation methodology, conversion mechanics, regulatory compliance requirements, and resulting shareholding structure.
Suggested Sections

1. Parties: Identification of the debtor company and the creditor(s) converting their debt

2. Background: Recitals explaining the existing debt arrangement and the intention to convert debt to equity

3. Definitions: Definitions of key terms used throughout the agreement

4. Details of Existing Debt: Specification of the debt being converted, including amount, interest, and original terms

5. Conversion Terms: Key terms of the conversion including conversion ratio, share price, and number of shares to be issued

6. Mechanics of Conversion: Procedure for implementing the conversion, including timeline and documentation requirements

7. Representations and Warranties: Standard representations by both parties regarding authority, validity of debt, and compliance

8. Conditions Precedent: Conditions that must be satisfied before the conversion can take place

9. Corporate Approvals: Required board and shareholder approvals for the conversion

10. Regulatory Compliance: Compliance with Companies Act, SEBI regulations, and other applicable laws

11. Share Rights: Rights attached to the newly issued shares

12. Covenants: Ongoing obligations of the parties

13. Termination: Circumstances under which the agreement can be terminated

14. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction for disputes

15. General Provisions: Standard boilerplate clauses including notices, amendments, and severability

Optional Sections

1. Foreign Investment Compliance: Required when the creditor is a foreign entity, addressing FEMA compliance and RBI approvals

2. Tax Indemnity: Specific tax-related provisions and indemnities when complex tax implications are involved

3. Shareholders' Agreement Provisions: Required when the conversion necessitates new shareholders' arrangements

4. Security Release: Needed when the original debt was secured and security arrangements need to be terminated

5. Put/Call Options: Optional rights for future share transactions between the parties

6. Director Appointment Rights: When the conversion includes rights to appoint directors

7. Tag-Along/Drag-Along Rights: When parties agree to include these rights for future share transfers

Suggested Schedules

1. Schedule 1 - Debt Details: Detailed breakdown of the debt being converted, including principal, interest, and calculation methodology

2. Schedule 2 - Share Details: Specifications of the shares to be issued, including class, rights, and restrictions

3. Schedule 3 - Conversion Calculations: Detailed calculations showing the conversion ratio and resulting shareholding

4. Schedule 4 - Corporate Authorizations: Copies of board resolutions and other corporate approvals

5. Schedule 5 - Form of Share Certificate: Template of the share certificate to be issued

6. Appendix A - Compliance Certificates: Required compliance certificates from company secretary or other authorities

7. Appendix B - Valuation Report: Independent valuation report supporting the conversion price

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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Applicable Law
Articles of Association
Board
Business Day
Completion
Completion Date
Conditions Precedent
Conversion
Conversion Date
Conversion Price
Conversion Ratio
Conversion Shares
Corporate Approvals
Creditor
Cut-off Date
Debt
Debt Documents
Debtor Company
Effective Date
Encumbrance
Equity Shares
Event of Default
Existing Shareholders
Financial Year
Governmental Authority
Independent Valuer
Indian GAAP
Indebtedness
Interest
Long Stop Date
Material Adverse Effect
Memorandum of Association
Original Debt Agreement
Outstanding Amount
Paid-up Share Capital
Parties
Principal Amount
Regulatory Approvals
Relevant Jurisdiction
Representatives
RBI
SEBI
Share Capital
Shareholders
Shareholders' Agreement
Subscription Amount
Transaction Documents
Valuation Report
Clauses
Parties
Recitals
Definitions
Interpretation
Debt Acknowledgment
Conversion Terms
Conversion Mechanics
Consideration
Conditions Precedent
Completion
Share Issuance
Corporate Authorization
Regulatory Compliance
Representations and Warranties
Covenants
Share Rights
Board Composition
Voting Rights
Dividend Rights
Transfer Restrictions
Tag-Along Rights
Drag-Along Rights
Pre-emptive Rights
Information Rights
Confidentiality
Non-Competition
Indemnification
Tax Matters
Notices
Assignment
Amendment
Waiver
Severability
Entire Agreement
Force Majeure
Governing Law
Dispute Resolution
Costs
Termination
Relevant Industries

Banking & Financial Services

Manufacturing

Real Estate

Infrastructure

Technology

Telecommunications

Healthcare

Retail

Energy

Mining

Construction

Transportation & Logistics

Hospitality

Media & Entertainment

Relevant Teams

Legal

Finance

Corporate Finance

Treasury

Compliance

Risk Management

Corporate Secretarial

Board of Directors

Executive Management

Investment

Corporate Development

Restructuring

Corporate Affairs

Regulatory Affairs

Relevant Roles

Chief Financial Officer

Finance Director

Corporate Finance Manager

Legal Counsel

Company Secretary

Investment Banking Officer

Restructuring Officer

Corporate Treasurer

Financial Controller

Compliance Officer

Risk Manager

Board Director

Managing Director

Chief Executive Officer

Investment Manager

Debt Restructuring Specialist

Corporate Finance Analyst

Legal Director

Business Development Director

Industries
Companies Act, 2013: Primary legislation governing company operations in India, including share capital, share issuance, and corporate restructuring provisions
Securities and Exchange Board of India Act, 1992: Regulates securities market and protects investor interests, relevant for share issuance and public offering requirements
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018: Specific regulations governing the issuance of new shares and disclosure requirements
Income Tax Act, 1961: Governs tax implications of debt to equity conversion, including potential tax benefits and liabilities
Foreign Exchange Management Act, 1999: Relevant if the debt conversion involves foreign creditors or foreign currency debt
Reserve Bank of India Act, 1934: Provides framework for debt restructuring and conversion, particularly relevant for banking regulations
Indian Contract Act, 1872: Fundamental contract law principles governing the agreement's formation and enforcement
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011: Applicable if the debt conversion results in substantial shareholding changes
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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