resolution to issue convertible notes


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This doc maker creates the resolutions required to approve the issue of convertible notes to investors.

Under New Zealand securities legislation, a company may not issue (or offer to issue) shares, options or other securities (including a convertible instrument) without providing detailed disclosure information to the new shareholders unless the company is satisfied that an exception to the information disclosure requirements of the Financial Markets Conduct Act 2013 applies in relation to that offer or issue.

Please see our NZ securities law – tech company capital raising guide for an explanation of the relevant exclusions.  A company must ensure that an exclusion applies before it agrees to take an investment amount that is convertible to shares.

Under the Companies Act 1993, unless stated otherwise in a company’s constitution, existing shareholders in the company have pre-emptive rights which means that any new shares in the company must be offered to existing shareholders before they can be issued to third parties.  If existing shareholders have pre-emptive rights, these rights will need to be waived by those shareholders before any shares can be issued to the investor upon conversion of the investment amount.

Under section 117 of the Companies Act 1993, the issue of new shares upon conversion of the investment amount that rank equal, or in priority, to existing shares requires approval by a special resolution of shareholders (i.e. a 75% majority), unless the constitution of the company expressly provides otherwise.  The constitution should be checked for such a provision and, if one is not provided or if the company does not have a constitution, the company must obtain the approval of shareholders holding at least 75% of the voting rights before any shares can be issued.  If the company has issued more than one class of shares (e.g. ordinary and preference shares), separate special resolutions of each group of shareholders who will be affected by the share issue will be required.  The Simmonds Stewart constitution provides that this section 117 approval is not required.

Consider whether this transaction qualifies as a major transaction for the company for the purposes of section 129 of the Companies Act 1993.  In general terms, major transactions involve assets or obligations which are greater in value than half of the company’s existing assets.  So, if the investment amount is greater than 50% of the value of the company’s assets, the issue will need to be approved as a major transaction by the company’s shareholders.  See the Simmonds Stewart template resolutions to approve a major transaction for the relevant resolutions if necessary.

The directors who sign this resolution will also need to sign a directors’ certificate that complies with section 49 of the Companies Act 1993 (the certificate is included in this doc maker).  The Company must upload a signed copy of the certificate to the Companies Office website within 10 working days after it is signed.

In addition, the company must notify the Registrar of Companies of the issue of any new shares upon conversion of the investment amount within 10 working days after the shares are issued.  This can be done online via the Companies Office website.

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