Document background
The Convertible Note Agreement is a strategic financing instrument widely used in the Hong Kong startup ecosystem, particularly during early funding stages when determining a company's valuation is challenging. This document establishes the terms for a loan that can convert into equity, typically during a qualified financing round or at maturity. It provides investors with the security of debt while offering the upside potential of equity investment, often including features such as conversion discounts and valuation caps. The agreement must comply with Hong Kong's Companies Ordinance, Securities and Futures Ordinance, and other relevant regulations. It's particularly valuable for startups seeking bridge financing or initial investment rounds, offering flexibility in terms of valuation timing while providing immediate capital access.
