Compared to equity transactions, there are fewer business documents used in convertible debt transactions. For clarity, we divided them into “commonly used” and “used occasionally.” Readers should also keep in mind that this article speaks in generalities where concepts are usually covered – each agreement is different and a particular problem can be addressed in a different document in your deal. To raise funds by issuing convertible bonds, it is possible to use either a convertible note subscription agreement or a convertible note instrument. If a company subscribes to one (or very little) investor for the note, a conversion note subscription agreement can be used. An information subscription contract is very similar to a purchase agreement note (above) – most of the time, it`s just a name agreement. From time to time, however, you will see that subscription agreements are used to take some of the more complex terms of a note and in a separate subscription contract, so that the note and subscription contract work as two halves of a convertible debt. The effect of doing it this way is the same, it only allows for a simpler note and a more in-depth processing of conversion mechanics in a more traditional contractual format. The terms of conversion of convertible bonds into equity under a convertible note subscription agreement are eligible financing in the event of a liquidity event or on a maturity date. This article aims to provide a quick overview and explanation of key documents in a fundraiser in which investors buy convertible bonds. Unlike a share transaction, these convertible debt transactions do not alter the company`s capitalization by adding new shareholders until the debt is converted into equity.

Sometimes note holders insist on things such as board seats, information rights, agreements against the issuance of shares or other debts and/or other conditions that are typically related to stock transactions. In this case, these contractual agreements between the company and the bondholders are usually written in a separate agreement with a title such as Note Holders` Agreement or Voting Agreement. Unlike a Simple Agreement for Future Equity (SAFE), a convertible loan established under a convertible bond contract is remunerated, has a maturity date and sets a minimum amount of funds to be obtained for equity financing.