In Switzerland in particular, convertible loans must be entered in the articles of association when they are converted into share capital. The name of the lender, the loan amount and the number of shares issued for 10 years are entered in the company’s public articles of association. For a privately held company, this makes it clear to outsiders how high the company valuation is. For the lender, this also has the disadvantage that it is publicly noted that the lender is a new shareholder of the company (Art. 634 para. 4 CO, https://www.fedlex.admin.ch/eli/cc/27/317_321_377/de#art_634).

In Switzerland, there is also a risk, particularly with younger companies, that additional costs will be incurred as a result of a compulsory revision. This is the case even if the company is exempt from the audit. This often occurs when the liquidity of the convertible loans is exhausted and the convertible loans are offset as debt against the often lower equity in the balance sheet (Art. 725b para. 2 CO, https://www.fedlex.admin.ch/eli/cc/27/317_321_377/de#art_725_b).

Finally, the 10/20 rule must already be observed when the convertible loans are issued: https://aequitec.ch/de/faq/issuing-convertible-loan-in-switzerland