Convertible Note Contract Template for Switzerland

A Convertible Note Contract is a flexible financing instrument that allows your Swiss company to raise capital initially structured as debt, with the option for investors to convert their loans into equity shares at predetermined trigger events. Under Swiss law, this agreement must comply with the Swiss Code of Obligations and corporate law requirements, making it an essential tool for startups and growth-stage businesses seeking capital while deferring company valuation decisions.

When do you need this document?

You need a Convertible Note Contract when your Swiss company requires immediate funding but cannot or prefers not to establish a definitive company valuation. This situation commonly arises during bridge financing rounds, where you need capital to reach the next major milestone before a larger equity round. Startups often use convertible notes when engaging with angel investors or early-stage venture capital firms who want to invest quickly without lengthy valuation negotiations. The document is also valuable when your company is between funding rounds, needs working capital for growth initiatives, or when market conditions make equity pricing difficult. Additionally, convertible notes provide an efficient mechanism for follow-on investments from existing investors who want to maintain their ownership percentage without complex equity restructuring.

Key legal considerations

Your Convertible Note Contract must address several critical legal elements to ensure enforceability and protect both parties' interests. The conversion mechanism requires precise definition of trigger events, conversion ratios, and discount rates or valuation caps that determine how debt converts to equity. Interest rate provisions must comply with Swiss usury laws and clearly specify accrual methods, payment schedules, and capitalization rules. Maturity provisions should outline repayment obligations if conversion doesn't occur, including any extension mechanisms or automatic conversion terms. Security and subordination clauses may be necessary depending on your company's existing debt structure and investor requirements. The agreement must also address investor rights during the note period, including information rights, pro-rata participation in future rounds, and any board representation or consent rights.

Legal requirements in Switzerland

Under Swiss law, your Convertible Note Contract must comply with the Swiss Code of Obligations (Articles 312-318 OR) governing loan agreements and Articles 620-763 OR covering corporate law requirements. The agreement requires proper authorization from your company's board of directors and may need shareholder approval depending on your articles of association and the note amount relative to existing share capital. If the notes qualify as financial instruments, you must consider Federal Act on Financial Market Infrastructures (FMIA) regulations regarding securities issuance and trading. The conversion mechanism must respect Swiss corporate law requirements for share capital increases, including proper board resolutions and commercial register filings when conversion occurs. Documentation must be in writing and properly executed according to Swiss contract law principles, with clear identification of all parties, consideration, and performance obligations. Additionally, if your convertible notes include security interests, you may need to comply with specific registration and perfection requirements under Swiss secured transactions law.