Convertible Loan Agreement
This agreement: (the Agreement) is entered into as of [effective date] between
[company name] a company registered in Singapore under number [uen] with registered office at [company registered address] (the Company);
[founder name] of [founder address] (the Founder); and
The Investors severally described in Schedule 1 herein (Investors)
(individually known as a Party and collectively Parties).
Whereas:
The Company is a company incorporated on [incorporation date] in Singapore as a private limited company; and
The Investors wish to make an investment by way of an unsecured convertible loan to the Company.
Interpretation:
Accrued Interest means
interest payable and accrued in respect of the Loan as calculated in accordance with Clause 3.2;
Affiliate means
a person, corporation, partnership or other entity, that Controls, is Controlled by, or is under common Control with a Party;
Anniversary Date means
each anniversary of the Effective Date or, if such date is not a Business Day, the next Business Day following;
Audited Accounts means
the Company's audited balance sheet and audited profit and loss account for the relevant financial year of the Company, together with the related cash flow statements, notes, directors' reports and Auditors' reports (unless the accounts are legally exempted from audit, in which case the accounts shall mean those approved by the Company's accountants);
Auditors means
[auditors name] or such other firm of chartered accountants as may be appointed as auditors of the Company from time to time;
Board means
the Company's board of directors;
Business means
the business conducted by the Company, as set out in Schedule 1 herein;
Business Day means
a day on which banks are normally open for business and which is not a Sunday or public holiday in Singapore;
Business IPRs means
the IPRs used by the Company in the operation of its business;
Business Plan means:
as at the Effective Date, the business plan (dated [business plan date]) prepared by the Company and reviewed and approved by the Board and used as reference for the Loan, and
after the Effective Date, the most recent business plan approved by the Board prior to the date on which the Warranties are given;
Change of Control means
in relation to the Company, where a person (or persons acting in concert) directly or indirectly, including through any Subsidiary or Holding Company or Subsidiary of such Holding Company:
has beneficial ownership over more than 50 per cent of the total voting rights conferred by all the issued shares in the capital of the Company which are ordinarily exercisable in general meeting; or
has the right to appoint or remove a majority of its directors; or
has power to direct that the affairs of the Company are conducted in accordance with its wishes;
in each case where such person or persons did not have such beneficial ownership, right or power at the Effective Date;
Claim means
a claim by the Investors for breach of any Warranty;
Companies Act means
the Companies Act (Cap 51) of Singapore;
Control means
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About this template
What is this template?
This is a debt financing instrument that permits an investor to lend money to a startup with the option to convert that debt into equity. It contains specific revenue-based repayment schedules if conversion does not occur and provides the investor with board observer rights upon conversion. It is not a standard equity purchase agreement or a SAFE.
When should you use it?
Use this when a Singapore company requires bridge funding before a priced equity round and wants to link repayment to future revenue streams. Use a standard Subscription Agreement instead if the parties are valuing the company and issuing shares immediately.
What's inside
| Clause | Name | What it does |
|---|---|---|
| 2 | Loan made by the Investors | The Investors provide the Loan Amount in Singapore Dollars solely for conducting the Business described in Schedule 1. |
| 3 | Interest | Accrued Interest is added to the principal on each Anniversary Date but is waived if the Investors choose to convert. |
| 4 | Conversion or Repayment Option | The Investors may convert the loan into shares upon a Sale, Listing, or Subsequent Financing, or demand repayment after three years. |
| 6 | Limits on Liability | The Company's maximum liability for all Claims under this agreement is capped at the Loan Amount. |
| 7 | Events of Default | Winding up, insolvency, or failure to issue Conversion Shares allows the Investors to demand immediate repayment of all outstanding balances. |
| 8 | Obligations of the Company | The Company must obtain written consent from the Investors before amending its Articles of Association or paying dividends. |
| 10 | Further Funding and Anti-Dilution | If the Company issues securities at a price lower than the Conversion Price, specific anti-dilution provisions in the Termsheet apply. |
Who it's for
- a Singapore private limited company raising unsecured debt from institutional investors that converts upon a subsequent financing round
- founders seeking to bridge a funding gap using a loan that converts based on a predefined Termsheet
- institutional investors providing capital to a startup where repayment is tied to 20% of the company's gross or net revenues
How long it runs and how it's signed
Law it's drafted under
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