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Convertible Bond Agreement for Indonesia

Convertible Bond Agreement Template for Indonesia

A comprehensive legal agreement governed by Indonesian law that establishes the terms and conditions for the issuance of convertible bonds, which are debt instruments that can be converted into equity shares of the issuing company. The document details the bond terms, conversion mechanisms, rights and obligations of both issuer and bondholders, and complies with Indonesian corporate and securities regulations, including OJK requirements. It encompasses crucial elements such as interest payments, conversion price calculations, events of default, and security arrangements while adhering to Indonesian investment and foreign exchange regulations where applicable.

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What is a Convertible Bond Agreement?

The Convertible Bond Agreement is a crucial financing instrument used in Indonesian business transactions when companies seek to raise capital while offering investors the flexibility to convert their debt investment into equity. This document is particularly relevant for growing companies seeking alternative financing options or companies preparing for future equity events. The agreement must comply with Indonesian regulatory requirements, including Law No. 40 of 2007 on Limited Liability Companies and OJK regulations governing securities. It typically includes detailed provisions on conversion mechanics, pricing, interest payments, investor protections, and company obligations. The document is especially important in the context of startup funding, corporate restructuring, or when companies wish to defer equity dilution while securing immediate financing.

What sections should be included in a Convertible Bond Agreement?

1. Parties: Identification of the Bond Issuer and the Bondholder(s)

2. Background: Context of the bond issuance, company status, and purpose of the financing

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

4. Bond Issuance: Details of the bonds being issued, including principal amount, issue date, and maturity

5. Interest: Interest rate, calculation method, payment dates, and default interest provisions

6. Conversion Rights: Terms and conditions for converting bonds into shares, including conversion price and ratio

7. Conversion Process: Detailed procedure for exercising conversion rights and timing requirements

8. Representations and Warranties: Statements of fact and assurances from both issuer and bondholders

9. Issuer Covenants: Positive and negative obligations of the issuer during the bond term

10. Events of Default: Circumstances constituting default and consequences thereof

11. Security: Details of any security or guarantees provided for the bonds

12. Transferability: Conditions and restrictions on transfer of the bonds

13. Notices: Communication procedures between parties

14. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction for disputes

15. General Provisions: Standard boilerplate clauses including amendments, waivers, and severability

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

1. Tag-Along Rights: Optional section for when bondholders are granted rights to participate in sale of company shares

2. Anti-Dilution Protection: Additional provisions protecting bondholders from dilution through corporate actions

3. Registration Rights: Rights of bondholders to require registration of converted shares, relevant for planned IPOs

4. Subordination Provisions: Required if the bonds are subordinated to other debt

5. Information Rights: Additional reporting requirements beyond standard covenants, often requested by institutional investors

6. Board Observer Rights: Rights of bondholders to appoint board observers, common in larger investments

What schedules should be included in a Convertible Bond Agreement?

1. Bond Certificate Form: Template of the physical or electronic bond certificate

2. Conversion Notice Form: Standard form for exercising conversion rights

3. Calculation Methods: Detailed procedures for calculating interest, conversion price adjustments, and other numerical terms

4. Corporate Authorizations: Copies of relevant board and shareholder resolutions

5. Security Documents: If applicable, details of security arrangements and guarantees

6. Disclosure Schedule: Exceptions to representations and warranties

7. Financial Covenants Schedule: Detailed financial ratios and calculations required under covenants

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Indonesia

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use

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