Convertible Notes, SAFEs and UBO: Before and After Conversion

A convertible note or SAFE gives its holder the right to become a shareholder — on a priced round, at maturity, or at a discount — but until conversion there are no shares and no votes. The ownership line therefore does not catch the holder: 0% of shares, 0% of votes. Two caveats. Embedded control rights: some notes carry board observer seats, consent rights over major decisions, or information rights that amount to influence — assess these under the control limb on their own merits; a note with veto rights over asset sales is a different instrument from a plain vanilla SAFE. The conversion itself as a pending event: the analysis should note material conversion rights as threshold events in waiting, so the company is ready when they trigger. But the register records the current position — rights noted in the analysis, not entries for holders of unconverted instruments.

Conversion is a UBO event by definition: new shares are issued, percentages shift, and someone may cross 25%. Run the post-conversion cap table before the round closes — the analysis belongs in the closing checklist, not after it. The new holder at or above 25% is recorded with the conversion as the grounds and the conversion date as the start date. Existing holders must be re-measured too: a priced round that converts notes can dilute a 30% founder below 25% (cessation on the ownership line — assess control before concluding) or concentrate a 22% holder above it (new entry). Discounts and valuation caps affect the number of shares issued on conversion — compute the actual post-conversion percentages, not the headline terms. The transfer-statement logic applies to the issuance: the new shareholder's statement on the beneficial-owner effect is part of the closing pack, and the 15-day update clock runs from the company's knowledge of the conversion.

Convertible stacks compound across rounds — notes from 2024 converting alongside a 2026 priced round — so the monitoring must be cumulative. Maintain a conversion schedule: every outstanding convertible instrument, its terms, its potential post-conversion percentage on the current cap table, and the holders. Re-run on every round: priced rounds, bridge notes, extensions — each changes the denominator and the conversion math. Maturity conversions: notes converting at maturity outside a round are easy to miss — diary the maturity dates as UBO checkpoints. Secondary conversions: notes transferred between holders before conversion — the new holder's position assessed on conversion. The discipline is simple: no conversion closes without a post-conversion 25% analysis, and no round closes without re-measuring every holder. The crossing is what the 15-day clock runs on — and crossings in convertible stacks are silent until the math is done.

Beneficial-ownership compliance is continuous, not a one-off filing. Whenever the company is informed of a change to the information in its registers — a new shareholder, a transfer, a passport renewal, an address change, a nominee's appointment or cessation — the registers must be updated within 15 days. Article 7 builds a formal notice procedure around doubtful cases: if it becomes clear to the legal person that a natural person could be a beneficial owner but the details are not properly registered, the company must inquire; if 15 days pass without a response, it registers the details it believes correct and informs the person of the inclusion. Share transfers get their own lock: no document relating to a change of ownership may be registered or enforced unless the transferee (or their representative) submits a statement on whether the transfer changes the beneficial owner, the nature of that change, and the new beneficial owner's information for the register. Practically, this means every share transfer, capital event and director change in your company should pass through a UBO checkpoint before it is finalised.