Frequently Asked Questions

What happens if convertible notes are still outstanding when the company is sold?

Properly drafted convertible notes should have provisions for the treatment of the note if a change of control happens while the convertible note remains outstanding. Some notes require payment of principal and interest in cash but may also include the right for the holder to make an election to receive stock consideration (if that is what the buyer is offering). Some notes may include a premium (usually a percentage, sometimes a multiple) that must be paid to the note investor in connection with a change of control.