You can easily issue convertible loan notes with Carta.
1. Issuing Convertible Loan Notes
Issuing Convertible Loan Notes
1. Make sure that convertible notes add-on is enabled.
2. Navigate to Fundraising > Unpriced investments > Closed investments.
3. Click Register investment > select which type of investment you would like to register (Convertible Loan Note, SAFE, ASA, Other type)
4. Select an already existing stakeholder or click Or Add New Noteholder Instead.
5. Enter the details related to the convertible. The required details (marked with a red asterisk on the platform) will vary according to the equity type. The details can include:
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[Convertible Note] Type - Denotes what type of convertible note is being issued.
1. Standard and other convertible notes are debt which can be repaid or converted to equity depending on terms in the agreement. With standard notes, an interest rate is required.
2. SAFE's are a simpler and standardised version of convertible notes developed by Y Combinator. SAFE's are not really debt and there is no interest nor maturity date attached to them.
3. Advanced Subscription Agreements (ASA's) are essentially payments for equity in advance and, e.g. not debt, which makes them suitable for UK SEIS/EIS-investments in certain cases. - Share Class.
- Date.
- Principal Currency.
- principal [Amount].
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Conversion Terms - Either conversion discount or fixed conversion price:
1. Conversion Discount (%) - Discount on the share price of future funding round which triggers the conversion of note. (Please enter a number between 1 and 100).
2. Fixed Price Conversion - The fixed price of the shares which noteholders can convert their notes into.
6. Click Advanced to associate the Convertible Note with a funding round or to associate it to an employment.
7. Click Save Draft or Publish and notify noteholder.
| Please note, you will only be able to publish the data if your account is live. |
Setting Interest Terms
When issuing a convertible loan note, it is possible set different interest terms. Note that interest terms are only applicable to Standard or Other types of convertible notes.
As of today, Carta supports the following interest formats:
- Day Count Method - select between Actual/365F or Actual/360
- Compounding interest - interest accumulates period after period
- Annual interest rate - a simple interest which accrues annually.
- One-time fixed interest- interest accrues only on the date of issuance.
Day Count Method
Actual/365F - A day count convention which calculates actual days in a time period, over a 365-day conventional year, regardless of the number of days in the year.
Actual/360 - A day count convention which calculates actual days in a time period, over a 360-day conventional year.
Compounding Interest
Click Is Compound Interest box if the note will accrue compound interest. Checking the box will allow to select different accrual periods.
Annual interest rate
Click Annual interest rate if the interest rate is applied annually.
One-time fixed interest
Select the second option if the note will have a one-time fixed interest rate. The interest will accrue on the day after the date of issuance.