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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 kiwi keep investment simple security 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 of the kiwi keep investment simple security are based on the “keep-it-simple-security” created by 500 Start-ups and include some of the investor friendly provisions typically included in convertible seed investments in the US and as adopted for other global markets
- the kiwi start-ups agreement for future equity is also 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 of the kiwi start-ups agreement for future equity are company friendly and are based on Y-Combinator’s template agreement of the same name
- the convertible shareholder loan agreement is a simple company friendly agreement, intended to be used when an existing shareholder lends money to a company as a form of bridging finance until an expected future financing event takes place.
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.
One source for New Zealand businesses seeking seed investment capital is investment from the Seed Co-Investment Fund operated by the New Zealand Venture Investment Fund.
NZVIF invests alongside angel investor groups (including ICE Angels, Angel HQ and other formal angel clubs) rather than investing directly, and will match those partners’ investments dollar for dollar (up to a maximum investment amount). Following discussions with NZVIF, we believe that NZVIF is open to co-investing in companies on the terms of this agreement, provided that certain NZVIF specific provisions are included and its partners are comfortable with the terms.
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. Please see our NZ securities law – tech company capital raising guide for an explanation of the relevant exclusions.
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