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This is a simple convertible loan agreement intended to be used when a shareholder lends money to a company, generally as a form of bridging finance until an expected event takes place (e.g. the signing of a large commercial agreement or a capital raising round).
In this agreement, the loan is to be drawn down on one date, is unsecured and is repayable and convertible (from the repayment date) at the company’s discretion. Because the loan can be repaid or converted at the company’s option, this convertible loan is effectively quasi-equity and is favourable to the company – depending on the interest rate and/or share conversion price. This loan agreement does not contain the lender-friendly provisions which would usually be included in loan agreements documenting loans from unrelated third parties.
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