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ARTICLE · 20 JUNE 2024

Are SAFEs/Convertible Notes Right For Me?

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If you are an early-stage founder or an investor who invests in early-stage companies, you've heard of ‘convertible notes'.

IndiaCorporate/Commercial Law
Joyce Law
Joyce Law

If you are an early-stage founder or an investor who invests in early-stage companies, you've heard of 'convertible notes'. The popular version(s) of convertible notes in the Indian market are adaptations of Y Combinator's popular "SAFE" structure (Simple Agreement for Future Equity). As the name suggests, the SAFEs promise a simple, quick and process-light means to raise capital.

Under Indian corporate law and exchange control laws Indian companies are permitted to issue convertible notes if they satisfy the following conditions:

  • Company should be registered as a startup with the DPIIT (Department for Promotion of Industry and Internal Trade, Ministry of Commerce).
  • Each convertible note issued by the Company should be at least of an amount of INR 25 Lakhs.

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