Document background
The Convertible Note Subscription Agreement is a crucial financing document used primarily by Indian startups and growing companies to raise interim funding. It's particularly useful when the company's valuation is unclear or when parties want to defer valuation discussions to a future equity round. The document structures the investment as a debt that converts to equity upon specific trigger events, typically with a discount to the next round's valuation or a valuation cap. This agreement needs to comply with Indian regulatory requirements, including the Companies Act 2013, SEBI regulations, and if foreign investment is involved, RBI guidelines. It's commonly used for bridge financing between equity rounds, early-stage investments, or strategic funding needs. The agreement includes detailed provisions on conversion mechanics, interest payments, investor rights, and company obligations, making it suitable for both domestic and foreign investments in Indian companies.
