Document background
The Note Conversion Agreement is a critical document used when companies wish to convert outstanding debt obligations into equity shares, often as part of startup funding rounds or corporate restructuring. It's particularly relevant in the Indian market where companies frequently use convertible notes as a bridge financing tool. The agreement must comply with various Indian regulations including the Companies Act, 2013, SEBI regulations (if applicable), and FEMA rules for foreign investors. The document typically outlines conversion triggers, valuation mechanisms, shareholder rights post-conversion, and necessary regulatory compliance steps. It's especially important in scenarios where early-stage companies have issued convertible notes to investors and are ready to transform that debt into equity, usually during a qualified financing round or at maturity.
