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Also known as convertible promissory notes, bridge notes, or convertible debt. Since convertible notes are securities, they must be registered, or qualify for an exemption from registration, under the Securities Act.

"Pro-rata right" is the right for the investor to participate in the qualified financing, by buying additional equity with additional cash upon the terms of the qualified financing, up to an amount that when taken together with the equity converted from the convertible notes, will result in the investor maintaining the ...

'Convertible Note' is an instrument issued by a startup company (that is a company registered under startup India Scheme) evidencing receipt of money initially as debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of such startup company, within a period not ...

The following are just a couple of the possible disadvantages of using convertible notes as a financing mechanism. If they don't convert, the notes eventually come due. This can result in the end of the startup if the note holders aren't willing to negotiate, and the startup doesn't have the means to pay off the notes.

Yes as per the companies Act 2013, there is no restriction on issuing convertible notes to Indian or Domestic investors.

Registered startups in India can issue convertible notes to investors who are foreign nationals, non-resident Indians, resident Indians and Indian companies. Convertible notes cannot be issued to non-resident individuals who are citizens of Pakistan or desh.

Requirements for issue of Convertible Note (CN): 25 Lakhs or more in a single tranche. Convertible Note can either be repaid or can be convertible into such number of equity shares of such startup company. Repayment or conversion to happen within a period of five years from the date of issue of the convertible note.

A convertible note agreement is a legal document that outlines the terms and conditions of a loan that can be converted into equity in the future. Essentially, it's a way for startups to raise money without having to give away equity upfront.