The government has extended the time limit for startups to convert debt investments in the company into equity to 10 years. This decision will help the budding entrepreneurs to come out from the effects of the pandemic. The startup ecosystem will also become stronger. Till now convertible notes were allowed to be converted into equity for five years from the date of issue. Now it has been increased to 10 years.
This information has been received from a note of the Department for Promotion of Industry and Internal Trade. Actually, an investor can invest in a startup with convertible notes. It is a type of bond/debt product. In this, the investor gets an option whether the startup company performs well or if it achieves any goal in future, then the investor can ask him to issue equity of the company in return for his investment. According to experts, convertible notes are an attractive source of early-stage funding for startups.