Document background
The Convertible Notes Agreement is a crucial financing instrument widely used by Indian startups and growing companies to secure early-stage funding while deferring equity valuation discussions. This document becomes relevant when companies seek alternative financing methods that offer flexibility in terms of future equity conversion. The agreement, structured under Indian law, provides a detailed framework for the issuance of debt that can convert into equity shares, typically during future funding rounds or specific trigger events. It includes essential elements such as conversion mechanics, interest rates, maturity dates, investor rights, and compliance requirements with Indian regulatory frameworks including the Companies Act 2013 and SEBI regulations. This type of agreement is particularly useful for companies in their seed or early growth stages, where determining an accurate valuation might be challenging or premature.
