Overview of a Shareholders’ Resolution to Issue Convertible Notes

What is a Shareholders’ Resolution to Issue Convertible Notes?

A Shareholders’ Resolution to Issue Convertible Notes is a resolution to be passed by the shareholders of a company to approve the issue of convertible notes. Generally, if a company wishes to create and issue convertible notes, the shareholders of the company must pass a resolution to give the board of directors the authority to execute the Convertible Note Term Sheet and the Convertible Note Instrument, and the authority to issue the convertible notes to investors.
 
There are two options when using a Shareholders’ Resolution to Issue Convertible Notes:
 
  • if a general meeting (i.e. a meeting of shareholders) is convened to address the issue, use the Minutes of a General Meeting to Issue Convertible Notes; or
  • if the company has only one shareholder or the shareholders choose to pass the resolution resolution by way of a written resolution, use the Written Resolution to Issue Convertible Notes.

Key points included

  • Details of the meeting (if using Minutes of a General Meeting);
  • Date of passing the resolution;
  • Details of the investor(s);
  • Approval and ratification of the term sheet and instrument; and
  • Granting of authority to board of directors to execute term sheet and instrument, and issue convertible notes.
 

Notes on signing

 
  • The Minutes of a General Meeting to Issue Convertible Notes should be signed by the chairperson of the meeting.
  • The Written Resolution to Issue Convertible Notes should be signed by all the shareholders.

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