Convertible Notes Developing Trends
Legal Era|October 2019
Since convertible notes are only permitted to be converted into ordinary equity, foreign investors continue to prefer instruments such as CCPS or CCDs which can be designed to carry preferred rights and returns
Convertible Notes Developing Trends

Start-ups in India have traditionally bootstrapped their seed funding, relying on angel investors to bolster their initial operations. Seasoned financial investors, be it individual angel investors or institutional investors, usually seek preferred securities, such as compulsorily convertible preference shares (“CCPS”) and compulsorily convertible debentures (“CCDs”). Preferred securities carry a predetermined coupon, liquidation preference, pre-emptive rights, and other protective and participative provisions such as veto right and board representation in the start-up.

However, these investments through CCPS and CCDs tend to consume time and cost for parties at both ends. Further, a lot of complex shareholder rights may not have any value within smaller companies looking to jumpstart their business. In this context, convertible notes may be able to solve some of these issues for both - the investors’ target of deploying capital and a start-up’s aim of raising funds.

Legal Framework

The Companies Act, 2013 (“Companies Act”) read with the Companies (Acceptance of Deposit) Rules, 2014 (“Deposit Rules”)1 provides an exemption to a private company registered as a start-up in accordance with the Start-up Indian Policy (“issuer”) from receiving a deposit by way of convertible notes. Convertible note is defined as an instrument “evidencing receipt of money initially as a debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of the startup company upon occurrence of specified events and as per the other terms and conditions agreed to and indicated in the instrument”.2

Bu hikaye Legal Era dergisinin October 2019 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

Bu hikaye Legal Era dergisinin October 2019 sayısından alınmıştır.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

LEGAL ERA DERGISINDEN DAHA FAZLA HIKAYETümünü görüntüle
If You Think Positive Covid Is A Big Opportunity
Legal Era

If You Think Positive Covid Is A Big Opportunity

Senior Vice President and Head of Legal, ESSAR CAPITAL, Badrinath Durvasula, holds forth on his professional journey, the essence of leadership, working from home, books and more…

time-read
10+ dak  |
December 2020
PROJECT DEVELOPMENT
Legal Era

PROJECT DEVELOPMENT

JOINT VENTURE TRANSACTIONS

time-read
10+ dak  |
December 2020
NEW ARBITRATION RULES
Legal Era

NEW ARBITRATION RULES

PUBLISHED BY THE LONDON COURT OF INTERNATIONAL ARBITRATION (LCIA) AND INTERNATIONAL CHAMBER OF COMMERCE (ICC)

time-read
6 dak  |
December 2020
M&A in the time of COVID and beyond
Legal Era

M&A in the time of COVID and beyond

What is clear for those engaging in cross-border M&A is that countries around the world are becoming increasingly protective of their economies and industries, with new rules being introduced and existing rules being more widely applied

time-read
6 dak  |
December 2020
SWITZERLAND A DIFFERENTIATED APPROACH TO FRAUD
Legal Era

SWITZERLAND A DIFFERENTIATED APPROACH TO FRAUD

Swiss law interprets the offense of fraud in a special way where in addition to the characteristics of deception and damage as known in many jurisdictions, a qualified lie, i.e. a malicious approach, is required

time-read
5 dak  |
December 2020
JOINT VENTURE DISPUTES MEDIATING
Legal Era

JOINT VENTURE DISPUTES MEDIATING

Mediation has shown itself to be a powerful tool for bringing a speedy and effective end to crossborder disputes while preserving the commercial relationship between them.

time-read
7 dak  |
December 2020
Recognition of HONG KONG INSOLVENCY PROCEEDINGS IN MAINLAND CHINA
Legal Era

Recognition of HONG KONG INSOLVENCY PROCEEDINGS IN MAINLAND CHINA

A TEST CASE IN THE MAKING?

time-read
8 dak  |
December 2020
CONFIDENTIALITY IN ARBITRATION: RECENT DEVELOPMENTS IN SINGAPORE
Legal Era

CONFIDENTIALITY IN ARBITRATION: RECENT DEVELOPMENTS IN SINGAPORE

Two recent developments in Singapore case law and legislation reflect a willingness to preserve confidentiality related obligations in all arbitrations

time-read
5 dak  |
December 2020
ESSENTIAL GOODS SERVICES UNDER IBC
Legal Era

ESSENTIAL GOODS SERVICES UNDER IBC

WHAT DOES IT ESSENTIALLY MEAN?

time-read
6 dak  |
December 2020
A BIDEN ADMINISTRATION'S NEW VISION FOR THE AMERICAN WORKPLACE
Legal Era

A BIDEN ADMINISTRATION'S NEW VISION FOR THE AMERICAN WORKPLACE

A LOOK AT THE KEY CHANGES PRESIDENT-ELECT BIDEN IS LIKELY TO MAKE ONCE HE TAKES OFFICE

time-read
7 dak  |
December 2020