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Compulsory Convertible Debentures Agreement Template for Canada

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Key Requirements PROMPT example:

Compulsory Convertible Debentures Agreement

Need a Compulsory Convertible Debentures Agreement for a Canadian technology startup raising CAD 5 million, with mandatory conversion in March 2025 or upon reaching CAD 20 million in revenue, including anti-dilution protection and board nomination rights for major debenture holders.

Document background
The Compulsory Convertible Debentures Agreement is utilized when a company seeks to raise capital through a debt instrument that will automatically convert to equity, typically used in growth financing scenarios or pre-IPO stages. This document is essential in the Canadian market where securities regulations and corporate law requirements must be carefully navigated. It outlines the complete framework of the debt instrument, including interest payments, security arrangements (if any), and conversion mechanics, while ensuring compliance with both federal and provincial regulations. The agreement is particularly relevant for companies looking to strengthen their balance sheet while providing investors with assured equity participation, making it a popular choice in growth sectors and scale-up situations. The mandatory conversion feature distinguishes it from standard convertible debentures, requiring careful attention to conversion triggers, price mechanisms, and resulting shareholding structures.
Suggested Sections

1. Parties: Identification of the issuing company and the debenture holders

2. Background: Context of the debenture issuance, including corporate authorizations and purpose of the financing

3. Definitions: Key terms used throughout the agreement, including financial, technical, and legal definitions

4. Debenture Terms: Principal amount, interest rate, maturity date, and ranking of the debentures

5. Interest Payments: Terms regarding calculation, payment periods, and method of interest payments

6. Mandatory Conversion: Terms and conditions of the mandatory conversion, including trigger events, conversion price, and mechanics

7. Conversion Mechanics: Detailed process for conversion, including notice requirements, share issuance procedures, and fractional shares treatment

8. Representations and Warranties: Standard representations from both issuer and debenture holders

9. Covenants: Ongoing obligations of the issuer, including financial covenants and corporate governance requirements

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

11. Notices: Communication requirements and methods between parties

12. Amendment and Waiver: Procedures for modifying the agreement or waiving rights

13. Governing Law: Specification of applicable law and jurisdiction

14. General Provisions: Standard boilerplate provisions including severability, entire agreement, and counterparts

Optional Sections

1. Security: Include if the debentures are secured by company assets

2. Anti-dilution Provisions: Include for protection against share dilution prior to conversion

3. Tag-Along Rights: Include if debenture holders are granted participation rights in sale transactions

4. Board Nomination Rights: Include if debenture holders are granted rights to nominate directors

5. Registration Rights: Include for public companies or where public listing is contemplated

6. Subordination: Include if ranking of debentures needs to be subordinated to other debt

7. Tax Provisions: Include specific tax treatment and withholding requirements if applicable

8. Foreign Ownership Restrictions: Include if relevant under Investment Canada Act or industry-specific regulations

Suggested Schedules

1. Form of Debenture Certificate: Template of the physical or electronic debenture certificate

2. Conversion Notice: Standard form for executing the conversion process

3. Calculation of Conversion Price: Detailed methodology for determining the conversion price

4. Corporate Authorizations: Copies of board and shareholder resolutions authorizing the debenture issuance

5. Security Documents: If secured, details of security arrangements and registrations

6. Shareholders Agreement: Terms governing shareholding post-conversion

7. Financial Covenants Calculation: Methodology for calculating financial covenants

8. Disclosure Schedule: Exceptions to representations and warranties

Authors

Alex Denne

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

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Relevant Industries

Technology and Software

Manufacturing

Mining and Resources

Clean Energy and Renewables

Real Estate and Property Development

Healthcare and Life Sciences

Financial Services

Infrastructure

Consumer Goods

Telecommunications

Relevant Teams

Legal

Finance

Treasury

Corporate Development

Compliance

Executive Leadership

Board of Directors

Investment Management

Corporate Secretariat

Risk Management

Relevant Roles

Chief Financial Officer

Corporate Finance Manager

Investment Banker

Securities Lawyer

Corporate Lawyer

Finance Director

Treasury Manager

Company Secretary

Compliance Officer

Investment Manager

Portfolio Manager

Chief Legal Officer

Financial Controller

Chief Executive Officer

Board Director

Industries








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, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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