Founder Series II: Decoding Shareholders' Agreements - Key Terms Index

This article is the second instalment of our Founders Series, aimed at providing an overview to founders of emerging companies of some commonly used terms in transaction documents. This is an illustrative guide.

1. Share Valuation and Ownership
   1. Convertible securities: ‘Convertible Securities' are financial instruments such as convertible debentures or preference shares that can be converted into a specified number of equity shares of the issuing company. Subject to statutory timelines, this conversion typically occurs at the discretion of the holder and can be triggered by certain events such as reaching a specific date or a milestone in the company's performance or, in some instances in the case of an event of default. Convertible securities provide investors with the potential for equity participation while initially offering certain additional benefits such as, fixed income/ downside protection in case of debt or dividend/ distribution benefits..