A SAFE note is not a debt instrument. Like a share warrant, it is an agreement between the investor and the company, in which the investor obtains, against cash payment, the right to acquire shares in the company during a future share turn. Therefore, SAFE notes do not lead to bankruptcies for the company (when repayment obligations can be problematic for a start-up) nor do they have the potential complexity of alternative financing (for example. B where a subordination obligation may be required to address existing creditors and their security interests through the company). An important aspect of a SAFE is that it does not create or reflect any debt between the parties. In practice, a SAFE is an agreement that can be used between a company and an investor. The investor invests money in the business with a safe. In exchange for the money, the investor will have the right to acquire shares in a future share round (if one of the shares is ahead of schedule), subject to certain parameters set out in the SAFE. In Australia, some SAFE bonds do not provide an valuation cap and simply apply a discount on the issue price of this series of shares.
However, if an valuation ceiling is provided, the number of shares that are issued to a holder would generally be the higher amount of the reference amount divided for the SAFE security by: Convertible notes may need more complex trading to choose the duration of the loan and its interest. The loan has an maturity date, that is, when the loan must be repaid or converted into equity at a predetermined rate. A simple agreement for future equitation (SAFE) is a relatively new type of agreement, often used by startups. This agreement allows investors to make a cash payment to small businesses that purchase shares in the event of a pre-agreed event. A SAFE is a convertible loan, both of which have given the investor the right to obtain shares at a preferential price in the future. However, the two instruments are fundamentally different, because the convertible bond is a debt, but not a SAFE. To choose whether you want to create a convertible note or a SAFE, you need to consider the following differences: Sprintlaw offers smart, simple and affordable legal solutions for small businesses and start-ups. It is an innovative and flexible agreement that provides appropriate safeguards for all parties. Find out what you need to know about this document and how to find free SAFE models that you can customize to suit your needs.