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Loan To Equity Conversion Agreement Template for England and Wales

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Key Requirements PROMPT example:

Loan To Equity Conversion Agreement

"I need a Loan to Equity Conversion Agreement to convert our £500,000 loan into Series A preferred shares at a £5M valuation, with the conversion to complete by March 2025, including anti-dilution provisions and board appointment rights for the lender."

Document background
A Loan To Equity Conversion Agreement is typically used when a company and its lender agree to convert outstanding debt into equity ownership. This arrangement is common in startup funding, corporate restructuring, or when companies face challenges servicing debt. Under English and Welsh law, the agreement must comply with the Companies Act 2006 and related legislation, particularly regarding share issuance and capital modification. The document details the conversion mechanism, share valuation, and necessary corporate approvals, while ensuring proper documentation for regulatory compliance and tax purposes.
Suggested Sections

1. Parties: Identification of the lender and borrower/company

2. Background: Details of the existing loan and reason for conversion

3. Definitions: Key terms used throughout the agreement

4. Conversion Terms: Specific terms of converting the loan to equity, including conversion price and timing

5. Conditions Precedent: Conditions that must be met before conversion can occur

6. Representations and Warranties: Statements of fact by both parties

7. Completion Mechanics: Process for executing the conversion

Optional Sections

1. Interest Treatment: Handling of accrued interest during conversion - used when loan includes interest components

2. Security Release: Provisions for releasing any security associated with the original loan - used when original loan was secured

3. Tax Provisions: Specific tax treatment of the conversion - used when tax implications need specific addressing

4. Partial Conversion Rights: Terms for converting only part of the loan - used when partial conversion is permitted

Suggested Schedules

1. Original Loan Agreement: Copy or details of the original loan agreement being converted

2. Conversion Calculations: Detailed calculations showing conversion ratio and resulting shareholding

3. Form of Board ReºìÐÓÖ±²¥s: Template board reºìÐÓÖ±²¥s approving the conversion

4. Share Certificate Template: Template for new share certificates to be issued

5. Companies House Forms: Relevant forms for filing the change in share capital

Authors

Alex Denne

Head of Growth (Open Source Law) @ ºìÐÓÖ±²¥ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions





































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Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company operations including share capital provisions, directors' duties, share allotment procedures, pre-emption rights, and company registration requirements

Financial Services and Markets Act 2000: Regulates financial services industry including financial promotion restrictions, regulated activities, and investment requirements

Corporate Insolvency and Governance Act 2020: Covers insolvency procedures and impact on existing creditor arrangements

Consumer Credit Act 1974: Governs consumer lending including consumer protection provisions and credit agreement regulations, if applicable to individual lenders

Financial Services Act 2012: Updates to regulatory framework and financial conduct requirements

Law of Property (Miscellaneous Provisions) Act 1989: Fundamental contract law principles affecting property and contractual arrangements

Income Tax Act 2007: Tax legislation affecting loan to equity conversions and related income tax implications

Corporation Tax Act 2010: Corporate tax implications for loan to equity conversion transactions

Financial Collateral Arrangements (No 2) Regulations 2003: Governs security arrangements and enforcement provisions in financial transactions

Modern Slavery Act 2015: Compliance requirements in corporate documentation for larger companies

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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