Arizona Term Sheet - Convertible Debt Financing
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How to fill out Term Sheet - Convertible Debt Financing?
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FAQ
Repayment Method With most convertible debt, you will repay the investment by converting the entire value to stock. Some investors, though, may also include language that obligates you to pay back a certain percentage of the original investment as cash and the remainder as stock.
Conversion to Equity - Accounting for Convertible Debt When the note converts, usually during a new funding round, the liability moves to the equity section of the balance sheet. At this stage, the convertible note is settled, and new equity instruments, typically preferred shares, are issued to the investor.
Convertible Notes are loans ? so they are recorded on the Balance Sheet of a company as a liability when they are made. Depending on the debt's maturity date, they can either be shown as a current liability (loans maturing within 12 months) or as a Long-term liability (loans maturing over 12 months).
Convertible Note - Reporting Requirements FIRC and KYC of the non-resident investor. Name and address of the investor and AD bank. Copy of MOA / AOA. Certificate of Incorporation. Startup Registration Certificate. Certificate from Practising Company Secretary.
The Minimum amount of Investment required is Rs 25 lakhs. CCD'S can be issued at any amount. There is no minimum amount criteria. Convertible Notes can be issued without prior valuation.
A term sheet is usually a non-binding agreement outlining the basic terms and conditions of the investment. It serves as a template for the convertible note for both parties.
Typical terms of convertible notes are: interest rate, maturity date, conversion provisions, a conversion discount, and a valuation cap.
Although it is customary to forego a term sheet, in some cases it may be required if the parties need to negotiate certain terms. It can be advantageous to use a term sheet for the company to easily summarize the terms of the notes for potential other investors purchasing a convertible note.