Series D investment contract essential items for converting convertible bonds into exchangeable preferred shares.

Law firm Veat received a request from learning development startup A (hereinafter referred to as "the client") to provide legal advice in the process of converting issued convertible bonds into redemption convertible preferred shares (RCPS), and drafted investment contracts necessary for the new Series D investment round.

The client needed to draft an investment contract (stock subscription agreement and investment agreement) in a complex situation where they were converting issued convertible bonds into redemption convertible preferred shares (RCPS) and simultaneously securing investment from new investors.

Law firm Veat provided comprehensive legal advice in the process of converting issued convertible bonds into redemption convertible preferred shares (RCPS), including applying a conversion price adjustment clause to accurately calculate the type and number of newly issued shares and procedures for registration necessary for the conversion of convertible bonds and the issuance of new shares.

In addition, during the Series D investment process, to secure approximately 1.5 billion KRW in investment, we thoroughly reviewed Korean and English investment contracts, identified points of conflict with the investment, and provided revision opinions to secure favorable conditions for both the investor and the company.

Conversion of redemption convertible preferred shares (RCPS) and convertible bonds

Redemption convertible preferred shares (RCPS) combine the characteristics of stock and bonds, allowing investors to receive shares from the issuing company after a certain period or convert them into common stock. RCPS provides priority dividends and liquidation preference, and allows the company to raise capital while maintaining flexibility in its capital structure.

The reason for converting convertible bonds into redemption convertible preferred shares (RCPS) is to improve capital structure, reduce interest expenses, secure financial flexibility, minimize dilution of shareholder value, attract investors, manage financial risk, and improve the company's financial condition and strategic flexibility. RCPS enables a conversion from debt to capital, reducing the debt-to-equity ratio, paying dividends instead of fixed interest expenses, protecting the influence of existing shareholders with voting restrictions, and helping to maintain credit ratings. These convertible bond conversion elements play an important role in the company's financial condition and equity structure.

The main considerations when converting convertible bonds are as follows. Converting convertible bonds plays an important role in the company's financial condition and equity structure, so advice from a law firm with extensive experience is necessary to prevent legal issues during the issuance and conversion process.

Law firm Veat provides legal advice throughout the entire process of convertible bond issuance, conversion price adjustment, and stock conversion, supporting the company's stable growth.

• Conversion Price Adjustment: A clause to adjust the conversion price of convertible bonds may be included depending on stock price fluctuations. This is a safeguard for investors, allowing them to convert into stock even if the stock price falls.
• Dilution of Shareholder Value: When convertible bonds are converted into stock, the stakes of existing shareholders may be diluted. Issuers should carefully issue convertible bonds to prevent this.

Law firm Veat provides trusted legal advisory services in the investment field. When securing investment from a variety of international investors, it is important to have a clear and accurate English investment contract review and advice. Through our senior foreign lawyers, we provide efficient language communication and have been swiftly and accurately reviewing the Korean/English versions of investment contracts based on our years of experience. Thoroughly reviewing and preparing the investment contract is an important step in increasing the company’s stability and growth potential, and is also a matter of building a relationship of trust with investors.

Law firm Veat has expertise in preventing potential legal problems that may arise during a startup’s investment process and leading to a successful investment. We hope that through Law firm Veat’s legal services, more startups will be able to secure successful investment and continue innovative growth.

Law firm Veat comprehensively handles various legal issues such as stock subscription agreements, shareholder agreements, investment agreements, conversion of convertible bonds, conversion price adjustment, and English contracts, and provides comprehensive legal advice, so please feel free to contact us.

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Law firm Veat