Convertible loans – how convertibles, interest, conversion rate and issuance work
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Short answer: A convertible is a debt instrument that provides the right or obligation to convert, in whole or in part, a claim into new shares in the company. This makes the instrument a combination of debt financing and a potential future equity stake.
| Loan amount | Capital that the investor lends to the company. |
| Interest | Can be current, capitalized, or structured in another way according to the terms. |
| Conversion price | Determines the amount of the claim required for each new share. |
| Maturity date | If conversion does not occur, the terms must specify what happens to the remaining debt. |
Convertible under the Companies Act
The Swedish Companies Act defines a convertible as a debt instrument issued by a limited liability company against consideration, granting the right or obligation to convert the claim into shares. The issuance of convertibles is primarily regulated in Chapter 15 of the Swedish Companies Act.
Why are convertible loans used?
They can be suitable when the company needs capital now but the parties want to defer the question of valuation or a direct share purchase. For the investor, there is initially a claim; later, the investment can be converted into ownership according to the agreed terms.
What should the terms regulate?
- loan amount and payment date,
- interest and capitalization,
- maturity date,
- conversion period and conversion price,
- adjustment in the event of a new share issue, split, or other capital events,
- early repayment,
- right to information and special investor protections,
- what applies in the event of an exit or change of control.
Preferential rights and directed issues
The Swedish Companies Act contains rules regarding preferential rights for shareholders. If the issue is directed to someone other than the shareholders or deviates from the preferential rights, the decision must meet the relevant corporate law requirements.
Convertible loans are more than an ordinary loan agreement
An ordinary promissory note is not sufficient to achieve a valid corporate law conversion mechanism. Issuance resolutions, terms, and corporate law documents must be aligned.
Convertible loan 2026/2027 – Swedish and English template package
The template package contains documents for the loan and conversion terms themselves as well as supporting corporate law documents.
FAQ
Is a convertible loan the same thing as a SAFE?
No. A Swedish convertible is a statutory debt instrument under the Swedish Companies Act, whereas a SAFE is a different contractual model with a different legal structure.
Can the conversion price be set freely?
The terms must be drafted within the framework of the Swedish Companies Act and with consideration for corporate law principles, issuance resolutions, and any minority protection rules.
Must the issue be registered?
Convertible issues are covered by the registration rules of the Swedish Companies Act. Always check the current registration process at the Swedish Companies Registration Office (Bolagsverket).
The article provides general information and does not replace individual legal advice. Agreements, collective bargaining agreements, and the circumstances of the individual case may affect the assessment.
