Loan notes—fundamentals


Published by a ½Û×ÓÊÓƵ Corporate expert
Practice notes

Loan notes—fundamentals


Published by a ½Û×ÓÊÓƵ Corporate expert

Practice notes
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This fundamentals note considers some of the key characteristics of loan notes which may be issued by a private limited company incorporated in England and Wales.

What is a loan note?

A loan note is a form of debt instrument issued by the debtor (known as the issuer) which entitles the noteholder (the lender) to principal and interest on the agreed sum. Interest to be paid out under a loan note is typically for a set period of time, which ends on a date at which the entire loan, ie the principal of the loan note and any previously accrued interest, is to be repaid.

What is a convertible loan note?

A convertible loan note is a loan note which is convertible into a different type of security (typically shares) of an issuer. Convertible loan notes offer flexibility for investors in terms of their investment in a company and typically include the freedom for them to choose between their repayment or conversion in exit scenarios allowing investors to select which option will provide them with the best return on the eventual

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