A debt to equity conversion agreement is one in which the borrower of a debt converts the amount borrowed into equity shares of the company. When the borrower proposes to make good of the debt borrowed by repaying the same in the form of equity shares of the company this agreement is entered into by both the parties. In this type of conversion there is no cash transaction but only an adjustment in the books of accounts of both the parties to the agreement. When the lender agrees to the debt to equity conversion the agreement is entered into by finalizing the various terms and conditions that pertain to the debt equity swap transaction.
The debt to equity conversion agreement holds all the information pertaining to the conversion transaction such as amount of debt, total debt outstanding on records, conversion ratio of debt to equity, date of conversion etc. The agreement has to be signed by authorized signatories of both the organizations in agreement of the terms.
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