How To Convert Promissory Notes To Equit?
Promissory note is a type of bond which contains a promise for debt paying. Before receiving dividend from the stockholders, the bond holder has to pay first. Bond owners cannot enjoy the ownership of the company. If you have a bond of any stock company, then you can convert the bond or promissory note into equity. The procedure to convert the bond into promissory note varies according to the type of the promissory note owned by you. If your business cannot make debt payment on time, then you can convert entire or partial debt into equity through manual agreement.
If you are converting the promissory note to equity, you have to agree on a market that is fair for the company. The conversion will help the owners of promissory notes and also small business owner who have taken a business or personal loan. If the borrower fails to repay the loan, you can file a lawsuit to recover the loan amount. If the borrower is devoid of cash, then the lender may obtain a judgment to share the ownership of the company. But, this may bring problems as you may end up in becoming business partners with someone you don’t like to have a partnership.
You can opt for the convertibility option as most of the bonds are convertible bonds that can be converted into the stock shares at a previously decided price. You have to contact the investor relations department of the company to organize the conversion for your convertible bond. You can sell the bond to buy stocks. It is easy to accomplish the conversion, if both of bond and stock are traded publicly. While purchasing the stocks by selling bond, you have to consider the capital gains received through the conversion of promissory note to equity.