The Convertible Bond Agreement is a key financing document used when companies seek growth capital while offering investors the potential upside of equity participation. This agreement, governed by Belgian law, is particularly relevant for scale-up companies and established businesses looking to raise capital without immediate equity dilution. It provides a detailed framework for the issuance of bonds that can be converted into company shares, typically at the option of the bondholder, during specified periods or upon certain events. The document must comply with the Belgian Companies and Associations Code, particularly Articles 5:55 to 5:69 for BV/SRL companies or Articles 7:62 to 7:79 for NV/SA companies, and includes essential provisions regarding interest payments, conversion rights, anti-dilution protections, and bondholder rights. It's commonly used in growth financing, pre-IPO rounds, or as part of larger financing structures where investors seek the security of debt with potential equity upside.
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1. Parties: Identification of the issuing company and the bondholder(s)
2. Background: Context of the bond issuance, company status, and purpose of the financing
3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement
4. Bond Issuance: Details of the bonds being issued, including principal amount, issue price, and denomination
5. Interest: Interest rate, calculation methods, payment dates, and default interest provisions
6. Conversion Rights: Terms and conditions for converting bonds into shares, including conversion price, ratio, and periods
7. Conversion Procedure: Detailed process for exercising conversion rights and issuing shares
8. Status and Ranking: Priority and ranking of the bonds in relation to other company obligations
9. Company Covenants: Issuer's obligations, including financial covenants and information rights
10. Anti-dilution Provisions: Protections for bondholders against share dilution and adjustments to conversion terms
11. Events of Default: Circumstances constituting default and consequences thereof
12. Redemption and Purchase: Terms for early redemption, maturity redemption, and company purchase rights
13. Payments: Payment mechanics, currencies, and tax provisions
14. Transfer Restrictions: Limitations on transfer of bonds and compliance with securities laws
15. Meetings of Bondholders: Procedures for bondholder meetings and collective decisions
16. Notices: Requirements for valid notices between parties
17. Governing Law and Jurisdiction: Confirmation of Belgian law governance and jurisdiction for disputes
1. Security: Include when the bonds are secured by company assets or guarantees
2. Subscription Rights: Required when bondholders have additional rights to subscribe for new shares
3. Tag-Along Rights: Include when bondholders have rights to participate in sale of company shares
4. Registration Rights: Required for convertible bonds that may convert into listed shares
5. Board Observer Rights: Include when bondholders are granted rights to appoint board observers
6. Information Rights: Detailed reporting requirements beyond standard covenants, often for larger investments
7. Change of Control: Special provisions triggered by change in company ownership
8. Subordination Provisions: Required when bonds are subordinated to other debt
1. Form of Conversion Notice: Standard form for bondholders to exercise conversion rights
2. Conversion Price Adjustments: Detailed calculations and scenarios for conversion price adjustments
3. Form of Bond Certificate: Template for physical bond certificates if issued
4. Financial Covenants Calculations: Detailed methods for calculating financial covenants
5. Pre-approved Share Issue Authorities: List of existing authorities for issuing shares on conversion
6. Bondholder Representatives: Details of appointed bondholder representatives if applicable
7. Secured Assets: List and description of assets securing the bonds, if applicable
8. Form of Transfer Certificate: Template for transferring bonds to new holders
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