Conversion
First of all, there is an important difference in terms of the 'type' of conversion that may take place via the convertible loan agreement. For example, we distinguish between a conversion to shares and a conversion to depositary receipts for shares. In some cases it is desirable to have the providers of capital convert to (a certain class of) shares, with the associated rights and obligations. In other cases, it is more obvious to have a possible conversion to depositary receipts for (a certain class of) shares, considering other associated rights and obligations compared to a conversion to shares. If it is desirable to proceed with the possible conversion to depositary receipts for shares, it is necessary to establish a trust office foundation (STAK), which will hold the shares corresponding with the depositary receipts for shares for the converted depositary receipt holders. This STAK does not need to be incorporated at the time of entering into the convertible loan agreement, but can also be incorporated within a certain period of time after an event causing the conversion to take place.
Cause for conversion
The convertible loan agreement specifies when the amount lent out (including accrued interest) is to be converted into (depositary receipts for) shares. These terms and conditions can be adjusted to the circumstances of the case, such as when a loan 'qualifies' as the type of financing that is required to trigger a conversion, which in practice is often reflected by raising a certain amount of that loan in advance.
Conversion rate
The 'rate' applied for the conversion can also be adapted to the specific requirements of the convertible loan agreement. Several options are available, such as converting at the 'fair market value', converting at the price paid by an investor for new shares and a 'qualified investment' or at a fixed amount if that amount is lower (or higher) than the aforementioned price. For the purposes of applying the discount usually included, the conversion price will still include the discount, if applicable.
Covenants
Depending entirely on the situation and the type of investors attracted by the convertible loan agreement, certain covenants may be included to ensure that investors have some degree of control over the company's expenses, in order to prevent their investment from entailing more risk than necessary.
Flexibility
The purpose of a convertible loan agreement is to obtain financial resources in an appropriate and relatively easy way. It is precisely the flexible nature of a convertible loan agreement that makes it an appropriate means. Therefore, do not hesitate to discuss the possibilities with us, so we can think along with you based on your wishes and check whether what you have in mind is legally feasible and practically achievable.