Document background
The Convertible Note Agreement is commonly used in the German startup and growth company ecosystem as a bridge financing instrument. It provides companies with immediate access to capital while deferring the complex valuation discussions typically associated with pure equity rounds. Under German law, particular attention must be paid to corporate law requirements, especially regarding share issuance and transfer restrictions. The document typically includes provisions for automatic conversion upon qualified financing rounds, optional conversion rights, interest accrual, and maturity terms. It serves as a crucial tool for companies seeking interim financing while planning for future equity rounds, offering investors the potential upside of equity participation with the security of debt instruments. The agreement must be carefully structured to ensure enforceability under German law while maintaining flexibility for international investment scenarios.
