The Note Conversion Agreement is a crucial document in Malaysian corporate financing, typically used when companies wish to convert outstanding debt obligations into equity shares. This agreement is commonly employed in startup funding rounds, debt restructuring, or when early-stage investors holding convertible notes exercise their conversion rights. The document must comply with Malaysian regulatory requirements, including the Companies Act 2016 and relevant securities regulations. It outlines critical elements such as conversion ratios, timing, conditions precedent, and the rights attached to the newly issued shares. The agreement is particularly important in protecting both the company's and investors' interests while ensuring a smooth transition from debt to equity ownership.
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1. Parties: Identification of the Note Holder(s), the Company, and any other relevant parties
2. Background: Recitals describing the existing promissory note(s) and the parties' intention to convert the debt into equity
3. Definitions and Interpretation: Definitions of key terms and interpretation rules used throughout the agreement
4. Conversion Terms: Core terms of the conversion including conversion price, number of shares to be issued, and timing
5. Conditions Precedent: Conditions that must be satisfied before the conversion can take place
6. Conversion Mechanism: Detailed process of how the conversion will be executed
7. Representations and Warranties: Statements of fact and assurances from both parties
8. Company's Obligations: Company's commitments regarding share issuance and regulatory compliance
9. Note Holder's Obligations: Note Holder's commitments regarding the surrender of notes and required documentation
10. Completion: Actions to be taken at completion of the conversion
11. Termination: Circumstances under which the agreement can be terminated
12. Notices: Process for formal communications between parties
13. Governing Law and Jurisdiction: Specification of Malaysian law as governing law and jurisdiction for disputes
14. General Provisions: Standard boilerplate clauses including amendments, severability, and entire agreement
1. Regulatory Compliance: Additional section required when the conversion involves regulated securities or requires specific regulatory approvals
2. Multiple Conversion Tranches: Required when the conversion will occur in multiple stages or tranches
3. Tag-Along Rights: Include when existing shareholders are granted rights to participate in the conversion
4. Anti-Dilution Protection: Include when providing protection against future dilution of converted shares
5. Board Appointment Rights: Include when the conversion grants the note holder rights to appoint board members
6. Registration Rights: Include for convertible notes in private companies where future public listing is contemplated
7. Tax Provisions: Required when specific tax treatments or obligations need to be addressed
8. Shareholder Approval: Include when shareholder approval is required for the conversion
1. Schedule 1 - Existing Note Details: Details of the original promissory note(s) including date, amount, and terms
2. Schedule 2 - Conversion Calculations: Detailed calculations showing conversion ratio, share price, and number of shares to be issued
3. Schedule 3 - Form of Conversion Notice: Template for the formal notice triggering the conversion
4. Schedule 4 - New Share Terms: Terms and rights attached to the new shares to be issued
5. Schedule 5 - Completion Documents: List of all documents required for completion of the conversion
6. Schedule 6 - Corporate Authorizations: Copies of required board and shareholder reֱs
7. Appendix A - Shareholders' Agreement Terms: If applicable, key terms from shareholders' agreement that will apply to converted shares
8. Appendix B - Regulatory Approvals: Copies of or requirements for necessary regulatory approvals
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