Convertible Note Agreement Template for the Netherlands

A Convertible Note Agreement is a crucial financing document that allows you to raise capital through debt that can later convert into equity shares. Under Dutch law, this agreement provides you with a flexible funding solution while avoiding the immediate need to establish a firm company valuation, making it particularly valuable for growing businesses and startups.

When do you need this document?

You need a Convertible Note Agreement when seeking bridge financing between funding rounds, when your company requires immediate capital but cannot agree on a current valuation with investors, or when you want to offer investors potential equity upside while maintaining debt-like protections. This document is essential for tech startups, scale-ups entering new markets, and established companies pursuing strategic growth initiatives. It's particularly useful when you're preparing for a Series A round but need interim funding to reach key milestones that will increase your company's valuation.

Key legal considerations

The conversion mechanism is the most critical element of your agreement, defining triggers such as qualified financing events, company exits, or maturity dates. You must carefully structure the interest rate, which can be simple or compound, and may include payment-in-kind provisions where unpaid interest converts alongside the principal. Investor protection clauses, including information rights, anti-dilution provisions, and most favoured nation terms, require careful negotiation to balance investor security with company flexibility. Security provisions, if included, must comply with Dutch security law and may require registration. The agreement should address scenarios where conversion doesn't occur, including repayment terms and potential penalties.

Legal requirements in Netherlands

Under the Dutch Civil Code Book 2, your company must have proper corporate authorization through board resolutions and, depending on your articles of association, shareholder approval for issuing convertible debt. The Financial Supervision Act may require compliance with prospectus regulations if the note offering exceeds certain thresholds or involves public solicitation. You must ensure the conversion mechanism aligns with Dutch share capital requirements, including authorized capital limits and pre-emption rights of existing shareholders. Corporate Income Tax Act implications must be considered for both deductibility of interest payments and tax treatment upon conversion. If your agreement includes security interests, registration with the Dutch pledge registry may be required. The Commercial Code governs certain notification and registration obligations, particularly if your company is publicly traded or meets specific size criteria.