This agreement is one of three different convertible instruments on our templates page that are intended to be used when recording either a seed investment from a third party investor or a bridge financing from existing shareholders:
- this agreement is intended to be used when a company is raising seed capital from a third party investor in the form of a convertible instrument. The terms are based on the “keep-it-simple-security” created by 500 Startups and include some of the investor friendly provisions typically included in convertible seed investments in the US and as adopted for other global markets
This agreement anticipates that the investment amount is drawn down in a lump sum on one date and is unsecured. The investment amount:
- automatically converts to equity on the date of a qualifying capital raise
- is repayable (potentially at a multiple of the outstanding amount) or convertible at the investor’s discretion on the occurrence of a liquidity event
- is repayable or convertible at the investor’s discretion at any time following maturity.
This agreement also anticipates that it may be one of a series of identical agreements entered into as part of a seed investment round. In that case, some decisions that relate to the investment round as a whole are to be made by a majority of the investors, rather than by an individual investor.
The taxation of agreements of this nature has not been widely discussed or tested in New Zealand. We do recommend that the investor receive specialist tax advice before entering into this agreement (noting that any tax obligations will be on the account of the investor rather than the company).
Under New Zealand securities legislation, a company may not issue (or offer to issue) shares, options or other securities without being satisfied that an exclusion to the information disclosure requirements of the Financial Markets Conduct Act 2013 applies in relation to that offer or issue.
Under New Zealand securities legislation, a company may not issue (or offer to issue) shares, options or other securities without providing detailed disclosure information to the new shareholders unless it is satisfied that an exclusion to the information disclosure requirements of the Financial Markets Conduct Act 2013 applies in relation to that offer or issue.