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Convertible Note Subscription Agreement

Convertible Note Subscription Agreement Template for Singapore

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Key Requirements PROMPT example:

Convertible Note Subscription Agreement

"Need a Convertible Note Subscription Agreement for my Singapore-based AI startup raising S$500,000 from three angel investors, with a 20% discount rate and 8% interest rate, converting at our next funding round or by March 2025."

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What is a Convertible Note Subscription Agreement?

The Convertible Note Subscription Agreement is commonly used by startups and growth companies in Singapore seeking to raise capital without immediately diluting equity. It provides a bridge between debt and equity financing, offering investors the security of debt with the upside potential of equity. This document is particularly relevant in early-stage funding rounds where company valuation might be challenging to determine. Under Singapore law, the agreement must carefully balance regulatory compliance with commercial flexibility, particularly regarding securities laws and corporate requirements. It typically includes detailed provisions on conversion mechanisms, valuation caps, discount rates, and investor protections.

What sections should be included in a Convertible Note Subscription Agreement?

1. Parties: Identifies the issuer and subscriber(s) of the convertible notes

2. Background: Context of the note issuance and purpose of the financing

3. Definitions: Key terms used throughout the agreement including conversion price, maturity date, and qualifying events

4. Subscription and Issue: Terms of subscription and issuance of the notes, including subscription amount and closing conditions

5. Conversion Rights: Terms and conditions for converting notes to shares, including conversion price and triggering events

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

7. Maturity and Repayment: Maturity date and repayment provisions, including early repayment rights

8. Events of Default: Circumstances constituting default and consequences thereof

9. Representations and Warranties: Key statements and assurances by parties regarding their capacity and authority

What sections are optional to include in a Convertible Note Subscription Agreement?

1. Security: Details of security arrangements when notes are secured by company assets

2. Subordination: Provisions regarding ranking of notes relative to other debt instruments

3. Tag-Along Rights: Rights of noteholders in case of share sale by existing shareholders

4. Information Rights: Rights to company information and financial reports for larger investments

What schedules should be included in a Convertible Note Subscription Agreement?

1. Note Certificate Form: Template of the note certificate to be issued

2. Conversion Notice: Form for noteholders to exercise their conversion rights

3. Capitalization Table: Current and post-conversion capitalization structure of the company

4. Key Terms: Summary of principal commercial terms of the convertible note

5. Corporate Authorizations: Required board and shareholder resolutions for note issuance

Authors

Alex Denne

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

alex.den.21@genieai.co
Relevant legal definitions













































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Industries

Companies Act (Cap. 50): Primary legislation governing corporate matters including issuance of securities, share capital requirements, debt instruments, directors' duties, corporate authority, and registration requirements

Securities and Futures Act (Cap. 289): Regulates securities offerings, prospectus requirements and exemptions, restrictions on offers of securities, and provides definitions of securities and relevant exemptions

Moneylenders Act (Cap. 188): Ensures compliance with moneylending regulations and interest rate restrictions to avoid inadvertent breach of moneylending laws

Contract Law: Covers Misrepresentation Act, common law principles of contract formation, and Electronic Transactions Act for electronic execution

Banking Act (Cap. 19): Ensures compliance with banking regulations, particularly regarding deposit-taking activities

Income Tax Act: Addresses tax treatment of interest payments, withholding tax considerations, and tax implications of note conversion

Stamp Duties Act: Covers stamp duty implications on issuance, transfer, and conversion of notes to shares

Personal Data Protection Act 2012: Governs the collection, use, and disclosure of personal data of parties involved in the agreement

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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