Convertible Loan Note Agreement Template for Nigeria

The Convertible Loan Note Agreement is commonly used in Nigeria's growing startup ecosystem as a flexible financing instrument, particularly for early-stage companies seeking growth capital. This document type bridges the gap between straight debt and direct equity investment, offering investors the security of debt with the upside potential of equity participation. Used primarily when company valuation is uncertain or parties wish to defer valuation discussions, it provides a structured way to invest with future equity participation rights. The agreement must comply with Nigerian corporate and securities laws, including CAMA 2020 and relevant Securities and Exchange Commission regulations. It typically includes detailed provisions on conversion triggers (such as qualified financing rounds or exits), valuation caps, discounts, and investor protections. The document is particularly relevant for startups seeking bridge financing or international investors looking to enter the Nigerian market.

1. Parties: Identification of the Lender(s), Company (Borrower), and any guarantors

2. Background: Context of the agreement, including company's business and purpose of the loan

3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement

4. Loan Amount and Purpose: Specification of the loan amount, drawdown conditions, and permitted use of funds

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

6. Repayment Terms: Repayment schedule, prepayment provisions, and maturity date

7. Conversion Rights: Terms and mechanics for converting the loan into equity, including conversion price and timing

8. Conversion Mechanics: Detailed process for executing the conversion, including notices and documentation requirements

9. Company's Representations and Warranties: Company's statements about its legal status, authority, and business condition

10. Lender's Representations and Warranties: Lender's statements about authority and capacity to enter agreement

11. Company Covenants: Ongoing obligations of the company during the loan term

12. Events of Default: Circumstances constituting default and consequences

13. Remedies: Rights and remedies available to parties upon default

14. Confidentiality: Obligations regarding confidential information

15. Notices: Process and requirements for formal communications between parties

16. Assignment and Transfer: Rules regarding transfer of rights under the agreement

17. Governing Law and Jurisdiction: Specification of Nigerian law as governing law and jurisdiction for disputes

18. Execution: Signature blocks and execution requirements