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A Convertible Agreement lets early-stage Swiss startups receive funding that later converts into company shares. It works like a loan at first, but instead of paying back money, the company gives investors equity when specific events happen, like a major funding round or IPO.

Swiss law treats these agreements as conditional debt instruments, offering flexibility for both investors and founders. The conversion terms usually include a discount on the future share price and sometimes a valuation cap. This makes them popular among Swiss tech startups, especially when setting a precise company valuation is challenging during early development phases.

Use a Convertible Agreement when your Swiss startup needs quick funding but determining an accurate company valuation proves difficult. This happens often during early development stages, particularly in tech and biotech sectors where the company's future value depends heavily on unproven innovations or pending patents.

The agreement works perfectly for seed-stage funding rounds between CHF 50,000 and CHF 1 million, especially when you need to close financing quickly without complex negotiations. It's also ideal when multiple small investors are involved, as it standardizes investment terms and postpones detailed equity discussions until a larger financing round occurs.

• Convertible Note Contract: The standard Swiss startup financing tool that combines a loan with future equity rights, typically including interest rates and automatic conversion triggers at qualified financing rounds.
• Conversion Agreement: A more flexible variation used for existing debt conversion into equity, often employed when restructuring company finances or converting shareholder loans, with customizable conversion terms and timing.

• Startup Founders: Initiate and sign Convertible Agreements to secure early-stage funding without immediately diluting their ownership or setting a firm valuation.
• Angel Investors: Provide initial capital through these agreements, typically investing CHF 20,000 to CHF 200,000 in exchange for future equity rights.
• Corporate Lawyers: Draft and review agreements to ensure compliance with Swiss corporate law and protect both parties' interests.
• Venture Capital Firms: Often participate in later rounds that trigger conversion, sometimes setting terms for earlier convertible investments.
• Board Members: Approve and oversee the execution of these agreements as part of their fiduciary duties.

• Company Details: Gather current registration data, articles of association, and shareholder information from the Swiss Commercial Register.
• Investment Terms: Define the investment amount, interest rate, maturity date, and valuation cap or discount rate for future conversion.
• Trigger Events: Specify which events will cause automatic conversion, such as qualifying financing rounds or IPO.
• Conversion Mechanics: Outline the exact formula for converting the investment into equity, including share class and voting rights.
• Board Approval: Secure formal board resolution authorizing the convertible agreement issuance under Swiss corporate law.

• Parties Section: Full legal names, addresses, and registration details of the company and investor(s) per Swiss Commercial Register requirements.
• Investment Terms: Precise amount, interest rate, and maturity date in CHF, following Swiss Code of Obligations standards.
• Conversion Mechanism: Detailed formula for share price calculation, including discount rate and valuation cap.
• Trigger Events: Clear definition of qualifying financing rounds, sale, or IPO that activate conversion.
• Governing Law: Explicit reference to Swiss law and jurisdiction for dispute resolution.
• Shareholder Rights: Post-conversion voting rights and share class specifications.

A Convertible Agreement differs significantly from a Bond Issuance Agreement in several key aspects, though both are debt instruments under Swiss law. While convertible agreements are primarily used by startups for flexible early-stage funding, bond issuance agreements serve more established companies seeking structured debt financing.

• Investment Size: Convertible agreements typically involve smaller amounts (CHF 50,000-1M) with individual investors, while bond issuances usually exceed CHF 10M and target institutional investors.
• Regulatory Requirements: Bond issuances face stricter FINMA regulations and listing requirements, while convertible agreements have simpler documentation needs.
• Flexibility: Convertible agreements offer customizable conversion terms and valuation caps, whereas bonds have standardized terms and fixed interest rates.
• Exit Mechanism: Convertible agreements transform into equity upon specific trigger events, while bonds typically require cash repayment at maturity.