The Convertible Promissory Note Purchase Agreement is a fundamental financing instrument in the Canadian startup and growth company ecosystem. It is typically used when companies need bridge financing between equity rounds, or when valuation determination is premature or complex. The agreement, structured under Canadian federal and provincial laws, provides a framework for debt that can convert into equity upon triggering events such as qualified financing rounds, acquisition, or IPO. It includes essential provisions for principal amount, interest rate, maturity date, conversion mechanics, and investor rights, while ensuring compliance with Canadian securities regulations. This document type is particularly valuable for companies seeking flexible financing solutions while deferring complex valuation discussions, and it offers investors potential upside through equity conversion features.
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1. Parties: Identification of the issuing company and the purchaser(s) of the convertible note
2. Background: Recitals explaining the context of the agreement and the company's intention to issue convertible notes
3. Definitions: Key terms used throughout the agreement including 'Maturity Date', 'Conversion Price', 'Qualified Financing', etc.
4. Purchase and Sale of Notes: Core terms of the note purchase including principal amount, purchase price, and closing mechanics
5. Terms of the Notes: Fundamental provisions regarding interest rate, maturity, and repayment obligations
6. Conversion Rights: Detailed mechanics of conversion, including automatic and optional conversion triggers and price calculations
7. Securities Law Compliance: Acknowledgments and provisions ensuring compliance with applicable securities regulations
8. Representations and Warranties of the Company: Company's statements regarding its authority, business, and compliance with laws
9. Representations and Warranties of the Purchaser: Purchaser's statements regarding investment capability and securities law compliance
10. Events of Default: Circumstances constituting default and corresponding remedies
11. Miscellaneous: Standard provisions including notices, amendments, governing law, and counterparts
1. Security Interest: Include when the notes are to be secured by company assets
2. Subordination: Include when the notes need to be subordinated to other company debt
3. Registration Rights: Include when purchasers are given rights to register converted shares for public trading
4. Board Observation Rights: Include when purchasers are granted rights to observe board meetings
5. Information Rights: Include when purchasers are granted specific rights to company financial information
6. Most Favored Nation Provision: Include when purchasers should have the right to adopt terms of future note issuances
7. Pre-emptive Rights: Include when purchasers are granted rights to participate in future financing rounds
1. Schedule A - Form of Note: The form of the convertible promissory note itself
2. Schedule B - Disclosure Schedule: Exceptions to company representations and warranties
3. Schedule C - Purchaser Questionnaire: Accredited investor questionnaire for securities law compliance
4. Schedule D - Risk Factors: Detailed description of investment risks
5. Schedule E - Capitalization Table: Current capital structure of the company
6. Appendix A - Wire Instructions: Banking details for transfer of funds
7. Appendix B - Company Financial Statements: Recent financial statements of the company
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Healthcare
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Consumer Products
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Media and Entertainment
Real Estate Technology
Artificial Intelligence
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Relevant Teams
Legal
Finance
Corporate Development
Executive Leadership
Treasury
Investor Relations
Compliance
Business Development
Board of Directors
Corporate Secretary Office
Relevant Roles
Chief Executive Officer
Chief Financial Officer
General Counsel
Corporate Secretary
Investment Director
Venture Capital Associate
Angel Investor
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Investment Banker
Finance Director
Business Development Manager
Startup Founder
Board Member
Chief Legal Officer
Treasury Manager
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