The State Duma in the third reading adopted a law on convertible loans when structuring investment portfolios. The authors of the bill believe that this will make it easier to invest in startups.
The State Duma adopted a law on convertible loans supported by start-ups, Incrussia reports.
The State Duma in the third reading adopted a law on convertible loans when structuring investment portfolios. The authors of the bill believe that this will make it easier to invest in startups.
As a result, the Duma passed a law allowing investors, on the terms specified in the agreement, to convert the loan into a share in the business. The current legislation allows companies to use the convertible loan mechanism, if all its provisions are regulated in the charter, loan agreement and the decision of the general meeting of participants. The adopted law introduces a unified regulation of this mechanism.
An investor who has sent funds to a project can return the loan granted to him and interest from the borrower or take part in a share of the capital. If investors see the potential of a company, they may decide to participate in the capital of this organization, rather than receive debt on a loan. This practice actively exists in international practice.
Convertible loans will not be available to banks, non-banking financial institutions, defense companies and organizations, 25% of whose shares are owned by the state.
Vitaly Vetrov, managing partner of the law firm Vetrov and Partners, will comment on what is happening.
We are happy to receive this news. The explicit provision of such an option would remove some of the complexities that have existed in the past in structuring the loan-to-share conversion. We hope that this will qualitatively affect the improvement of the investment climate and business development.
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