Overview of Convertible Instruments in Singapore

Convertible Loan Notes (CLN) are traditionally used as a form of convertible debt financing by companies. They have no standard form and therefore, terms vary.

Typically a short-term debt may be converted into shares at a later date, at a discounted conversion price, or unsecured debts.

Keep It Simple Securities (KISS) was spearheaded by 500 Startups as an alternative to Simple Agreement For Future Equity (SAFE). The debt version bears a closer resemblance to CLN. It is subsequently varied by various law firms/venture capital firms.

KISS is a convertible instrument used by early-stage companies to document seed or pre-seed investments from investors, and are typically unsecured debts.

Convertible Agreement Regarding Equity (CARE) is a standard form released by VIMA. It includes a recital stating that the parties agree that neither party has modified the standard form – other than to fill in blanks or pick options.

CARE is a convertible instrument that allows an investor to either receive shares or cash upon the occurrence of certain events and are typically unsecured debts.

These convertible instruments are differentiated by factors such as

• The Investment
  • Conditions to Investment
  • Drawdown on Investment
  • Maturity Feature
  • Early Repayment of the Investment Amount
  • Warranties
  • Transfer
• The Conversion
  • The Trigger Event for Conversion
  • Liquidity/Exit Event
  • Optional Conversion
  • Class of Conversion Shares
• Additional Company Obligations
  • Most Favoured Nation (MFN) Clause
  • Company Undertakings
• Investor Rights
  • Board Rights
  • Information Rights
  • Participation Rights
• Restrictions
  • Restrictions on Founders
  • Founder Undertakings
  • Events of Default
  • Dividend