News & Analysis as of

Convertible Debt

Final EU Guidelines on Converting Debt to Equity in Bail-in Published

by Shearman & Sterling LLP on

The European Banking Authority has published final Guidelines on the setting of rates of conversion of debt to equity in bail-in under the Bank Recovery and Resolution Directive. The Guidelines are addressed to national...more

Convertible Debt Instruments for Startup Financing

Most start-ups initially fuel the idea behind the business with capital raised from friends and family. This “seed round” financing is often only enough to prove the concept of the business, but perhaps not enough cash to...more

Controversial Debt-Equity Regulations Finalized With Limited Fixes, Concessions and Reservations by Government

On October 13, 2016, Treasury and the IRS issued important new final and temporary regulations (the “Regulations”) under section 385 of the Internal Revenue Code addressing the treatment of intercompany debt for U.S. federal...more

For Food & Beverage Entrepreneurs, Financing Deals Often Come In More Flavors Than Just Vanilla: Insights from Nutter’s Will...

by Nutter McClennen & Fish LLP on

Will Bernat, a partner in Nutter’s Business Department and a member of the firm’s Emerging Companies and Commercial Finance practice groups, weighed in on financing deals for food and beverage companies in Nutter Insights....more

Chasing Waterfalls

Previously I discussed the importance of a company’s cap table. In addition to the importance of the cap table while the company is a going concern, it is critically important during the exit because it is a key tool in...more

KISSes and Other Convertible Equity Alternatives…Are They SAFE?

In earlier posts, we have discussed convertible debt, which remains a popular pre-equity funding path for early stage companies. However, in recent years, alternatives to convertible debt have emerged that offer certain...more

An Emerging Trend in Early-Stage Company Financing? – After Years of Growing Ubiquity of Convertible Notes, a Return to Priced...

by McCarter & English, LLP on

After years of increasing acceptance of and reliance on convertible note financings as a mechanism for funding early-stage companies, we have noted a clear emerging trend away from such transactions (and others like them,...more

Factoring Convertible Debt into your Next Equity Round Price

In the past we’ve talked about structuring and maintaining capitalization tables and thresholds and mechanics involved in converting convertible notes into equity. It makes sense that convertible notes would impact a...more

Global Private Equity Newsletter - Summer 2016 Edition: New Proposed Regulations Increase Scrutiny on Related-Party Debt

by Dechert LLP on

New rules recently proposed by the U.S. Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) would re-characterize purported debt instruments as equity instruments, and could have significant implications...more

Convertible Debt Term Sheets – What Companies Need to Know

Convertible debt is a type of financing companies frequently seek as a prelude to their first significant preferred equity financing, or as a bridge round between equity financings. A convertible debt round will typically...more

Overview of Cap Tables

A company’s “capitalization” is, in one sense of the word, a breakdown of its ownership structure, in terms of equity and convertible debt. A new venture with just one founder, and no other parties involved yet, has the...more

IRS Proposes Updates to Rules for Deemed Distributions of Stock and Stock Rights

On April 13, 2016, the U.S. Department of the Treasury issued proposed regulations under Section 305(c) of the Internal Revenue Code that would resolve certain issues relating to the amount and timing of deemed distributions...more

2016 Venture Capital Report

by WilmerHale on

The 2016 Venture Capital Report provides an in-depth analysis of, and outlook for, the US and European venture capital markets. The report features industry and regional breakdowns, and a look at trends in venture capital...more

Preferred Equity Financing Term Sheets – What Companies Need to Know

As a founder of a startup, receiving your first venture capital term sheet can be one of the most exciting times in the early life of your company. Knowing that potential investors believe in your team and your company enough...more

Observable Networks Secures $1.625 Million In Convertible Debt Funding From DH Capital and Vectis II

by Bryan Cave on

St. Louis, MO – February 19, 2016 — Observable Networks Inc., an emerging leader in advanced threat detection services, today announced it has closed $1.625 million in convertible debt funding from investors arranged by DH...more

Unlocking the SAFE – An Alternative to Convertible Notes

by Foley & Lardner LLP on

With the increasing level of investment in emerging companies, entrepreneurs are being presented with a wider range of financing documents. One of the relatively newer financing instruments is the “SAFE” (simple agreement for...more

In Case You Missed It: Launch Links - February 2016 #2

by WilmerHale on

Some interesting links we found across the web this week: Newest VCs: 7-Eleven, Vitamin Shoppe, JetBlue Airways launch venture operations - Looking for a one-stop shop for slurpees and early stage investment?...more

Seed Investing: Understanding the Landscape - Part III

by WilmerHale on

In this final installment of our series on seed instruments, we explore the Simple Agreement for Future Equity. Startup accelerator Y Combinator (YC) introduced a new seed-stage investing tool, safe—an acronym for...more

Technology Industry Newsletter - January 2016

by Buchalter on

As we begin the new year, it is a good time to reflect on the emerging trends in technology that present opportunities to be explored by entrepreneurs who are considering starting new businesses and growing existing...more

Seed Investing: Understanding the Landscape - Part II

by WilmerHale on

In this second post of our three-part blog series on the different types of seed instruments we will explore Series Seed. Series Seed documents were introduced by startup lawyer Ted Wang and venture capital firm...more

Seed Investing: Understanding the Landscape - Part I

by WilmerHale on

Starting a company has never been easier. Technology solutions for payroll, accounting, cloud computing and payment systems have made it much cheaper to take care of the back end. ...more

New 871(m) Regulations Finalize Dividend Equivalent Payment Withholding Rules for Equity Derivatives

On September 17, 2015, the IRS and the Treasury Department issued final, temporary, and proposed regulations under section 871(m) of the Internal Revenue Code (collectively, the “new regulations”) that provide the rules for...more

Convertible Equity: The Founder’s Alternative to Convertible Debt

by Varnum LLP on

Convertible debt (a loan that converts into equity upon the closing of a round of financing or other conversion event) has long been the preferred investment vehicle of early-stage investors, particularly angel investors, as...more

Tax Alert: IRS Untangles Section 163(L) in Cross-Border Hybrid Financing Transaction

by Fenwick & West LLP on

“In terrorem” or anti-abuse provisions often receive a lack of judicial and administrative interpretation. Section 163(l) of the Code, enacted in 1997, is no exception, so that even now certain fundamental questions relating...more

SAFEs and KISSes Poised to Be the Next Generation of Startup Financing

Overview - In late 2013, startup accelerator Y Combinator unveiled its Simple Agreement for Future Equity (“SAFE”) investment instrument as an alternative to convertible debt. While SAFE templates appeared in...more

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