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Promissory Note Conversion Agreement Template for Germany

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Key Requirements PROMPT example:

Promissory Note Conversion Agreement

"I need a Promissory Note Conversion Agreement under German law for converting a €500,000 bridge loan into Series A preferred shares at a 20% discount to the round price, with the conversion to be completed by March 2025."

Document background
The Promissory Note Conversion Agreement is typically used in German corporate financing scenarios where a company wishes to convert existing debt obligations into equity. This commonly occurs in startup financing rounds, debt restructuring, or as part of pre-agreed financing arrangements. The document is essential when companies and investors want to transform debt instruments into ownership stakes, requiring careful consideration of German corporate law, particularly the GmbH-Gesetz or Aktiengesetz depending on the company structure. The agreement must address various aspects including valuation, conversion ratios, tax implications, and regulatory requirements under German law. It's particularly relevant in situations where bridge financing through promissory notes is being converted as part of a larger financing round or strategic corporate restructuring.
Suggested Sections

1. Parties: Identification of the note holder and the issuing company

2. Background: Context of the original promissory note issuance and reason for conversion

3. Definitions: Key terms used throughout the agreement, including conversion-related terminology

4. Original Promissory Note: Details of the existing promissory note including principal amount, interest rate, and maturity date

5. Conversion Terms: Specific mechanics of the conversion, including conversion ratio/price and timing

6. Conditions Precedent: Prerequisites for conversion, including corporate and regulatory approvals

7. Implementation of Conversion: Process and steps for executing the conversion

8. Representations and Warranties: Statements of fact and assurances from both parties

9. Tax Provisions: Treatment of taxes arising from the conversion

10. Costs: Allocation of costs related to the conversion process

11. Notices: Communication requirements and contact details

12. Governing Law and Jurisdiction: Confirmation of German law application and jurisdiction

13. Miscellaneous: Standard boilerplate provisions including severability and amendments

Optional Sections

1. Security Release: Required if the original promissory note was secured by any assets or guarantees

2. Registration Rights: Needed if the converted shares require special registration provisions

3. Board Observer Rights: Optional provisions granting the converting noteholder rights to observe board meetings

4. Tag-Along Rights: May be included if the converting noteholder is to receive minority shareholder protections

5. Future Financing Participation: Optional rights for the noteholder to participate in future financing rounds

6. Regulatory Compliance: Required if the conversion triggers specific regulatory requirements under German law

Suggested Schedules

1. Original Promissory Note: Copy of the original promissory note being converted

2. Corporate Resolutions: Relevant board and shareholder resolutions approving the conversion

3. Conversion Calculations: Detailed calculations showing the conversion mechanics and resulting shareholding

4. New Share Certificate: Form of share certificate to be issued upon conversion (if applicable)

5. Updated Capitalization Table: Post-conversion capital structure of the company

6. Required Regulatory Filings: Forms and notifications required under German law

Authors

Alex Denne

Head of Growth (Open Source Law) @ ºÚÁÏÊÓÆµ | 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

Financial Services

Venture Capital

Private Equity

Manufacturing

Healthcare and Biotech

Real Estate

E-commerce

Professional Services

Clean Technology

Industrial

Media and Entertainment

Relevant Teams

Legal

Finance

Corporate Development

Treasury

Tax

Compliance

Board of Directors

Corporate Secretariat

Investment

Accounting

Relevant Roles

Chief Financial Officer

Chief Executive Officer

Finance Director

Legal Counsel

Corporate Secretary

Investment Manager

Venture Capital Partner

Private Equity Manager

Financial Controller

Treasury Manager

Corporate Development Director

Compliance Officer

Tax Director

Investment Banker

Company Director

Industries








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