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Convertible Loan Agreement Template for Switzerland

A Swiss law-governed Convertible Loan Agreement is a sophisticated financing instrument that combines elements of debt and potential future equity investment. This agreement documents the terms under which an investor provides funding to a company as a loan that can later be converted into equity shares under specified conditions. The document addresses Swiss legal requirements, including compliance with the Swiss Code of Obligations, and typically covers loan terms, interest rates, conversion mechanics, representations and warranties, and various investor protection provisions. It serves as a bridge financing tool, particularly suitable for growth companies seeking flexible funding options while deferring company valuation.

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What is a Convertible Loan Agreement?

The Convertible Loan Agreement under Swiss law is primarily used in growth company and startup financing scenarios where traditional equity investment might be premature or impractical. This document is particularly relevant when companies need bridge financing between funding rounds or when parties prefer to defer company valuation discussions. The agreement, governed by Swiss law and complying with the Swiss Code of Obligations, provides investors with the security of a debt instrument while offering the potential upside of equity participation through conversion rights. It includes detailed provisions on loan terms, conversion mechanisms, investor protections, and company obligations. The document is commonly used in the Swiss startup ecosystem and can be adapted for various investment sizes and company stages, from early-stage startups to more established growth companies seeking additional capital.

What sections should be included in a Convertible Loan Agreement?

1. Parties: Identification of the Lender(s) and Borrower with full legal names and addresses

2. Background: Context of the agreement, including the Borrower's business and purpose of the loan

3. Definitions: Definitions of key terms used throughout the agreement

4. Loan Amount and Disbursement: Specification of the loan amount, currency, and disbursement conditions

5. Interest: Interest rate, calculation method, and payment terms

6. Term and Repayment: Duration of the loan and repayment provisions

7. Conversion Rights: Terms and conditions for converting the loan into equity, including conversion price and mechanism

8. Conversion Period: Timing and conditions when conversion rights can be exercised

9. Representations and Warranties: Standard representations and warranties from both parties

10. Covenants: Ongoing obligations of the Borrower during the loan period

11. Events of Default: Circumstances constituting default and consequences

12. Taxes: Treatment of taxes and withholding requirements

13. Notices: Communication requirements and contact details

14. Governing Law and Jurisdiction: Confirmation of Swiss law governance and jurisdiction

15. Miscellaneous: Standard boilerplate provisions including severability, entire agreement, and amendments

What sections are optional to include in a Convertible Loan Agreement?

1. Security: Include when the loan is secured by specific assets or guarantees

2. Anti-dilution Protection: Include when protection against share dilution is required for conversion rights

3. Information Rights: Include when Lender requires specific reporting or information access rights

4. Board Observer Rights: Include when Lender is granted rights to attend board meetings

5. Most Favored Nation: Include when ensuring the Lender gets best terms offered to other investors

6. Subordination: Include when the loan needs to be subordinated to other debt

7. Change of Control: Include when specific provisions are needed for change in company ownership

8. Assignment and Transfer: Include when transfer rights need specific regulation beyond standard terms

What schedules should be included in a Convertible Loan Agreement?

1. Drawdown Notice: Form of notice for requesting loan disbursement

2. Conversion Notice: Form of notice for exercising conversion rights

3. Capitalization Table: Current and post-conversion capital structure of the Borrower

4. Calculation of Conversion Price: Detailed methodology for calculating the conversion price

5. Form of Shareholders' Agreement: Agreement to be entered upon conversion

6. Corporate Documents: Relevant corporate approvals and documents

7. Security Documents: If applicable, documents relating to any security provided

8. Conditions Precedent Documents: List of required documents prior to disbursement

Authors

Alex Denne

Advisor @ 蜜桃传媒AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Switzerland

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use

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