Short answer
When a Swiss convertible loan fits
A Swiss CLA starts as debt. At a contractually defined event—usually a qualified equity financing—the outstanding balance converts into shares using the agreed pricing mechanics. Valuation is deferred, not avoided.
The structure is most useful when a startup needs runway quickly, a larger round is credible and the parties do not want to fix a full valuation today. If several loans, side letters or promised equity already exist, a conversion waterfall becomes part of the signing decision rather than an exercise for the next round.
SECA publishes short- and long-form CLA models for Swiss startups. The long form assumes a Swiss stock corporation and an institutional investor seeking more sophisticated protections; key commercial terms are examples or blanks. The model is a strong drafting reference, not a substitute for transaction-specific structuring.
Three structure profiles side by side
| Decision | Founder-leaning | Balanced / neutral |
|---|---|---|
| Speed | Focused document with limited additional rights | Clear core mechanics plus protections justified by the investor and transaction |
| Valuation | Valuation deferred; cap and discount constrained | Pricing tested across expected and downside rounds |
| Governance before conversion | No or narrowly defined early control rights | Information or consent points limited to identified risks |
| Downside path | Longer runway and a clear no-round outcome | Maturity, exit and a smaller financing expressly addressed |
| Cap-table visibility | Simple instrument, still modelled fully diluted | All loans, interest, pool effects and conversion sequence reconciled |
| Investor protection | Protection centred on conversion and information | Pro-rata, information or equal-treatment rights negotiated deliberately |
Worked example
Which pricing mechanic applies?
AssumptionsSimplified example: CHF 500,000 principal, no accrued interest in the arithmetic, a CHF 4.0m next-round pre-money valuation, a CHF 3.0m valuation cap and a 20% discount.
ResultThe discount implies a CHF 3.2m pricing basis, while the cap sets a CHF 3.0m basis. If the agreement uses the lower conversion price, the cap is more favourable to the lender in this scenario. The actual share count also depends on the capitalization definition, conversion sequence, employee pool, outstanding balance and round documents.
Decision ruleNever compare the cap and discount in isolation. Read the pricing definition, then model the expected round, a lower round and a no-round outcome on a fully diluted basis.
The terms that move the outcome
Qualified financing
Define the threshold, instrument and closing precisely enough to identify when conversion is mandatory and what happens in a smaller or staged financing.
Valuation cap
The cap limits the valuation basis used for conversion. The number alone is incomplete without pre-/post-money logic and the contractual capitalization definition.
Discount
The discount reduces the next-round price. Read it together with the cap, the rule selecting the conversion price and transaction-specific Swiss tax analysis.
Interest and loan balance
Confirm whether and how accrued interest converts. The balance used at conversion directly affects the number of shares issued.
Maturity and no financing
Maturity is not boilerplate. Repayment, extension, voluntary conversion and the company’s expected liquidity need to work as one outcome.
Exit before conversion
A sale before the next round needs an explicit rule. Repayment, a multiple, conversion or another return can produce materially different economics.
Ranking and subordination
Align the lender’s risk position with the company’s balance sheet, existing debt and the expectations of the next financing.
Additional rights
Pro-rata, information, consent or most-favoured-term rights can carry real economic value and may influence governance before conversion.
Conversion sequence
With several instruments, order and denominator decide how many shares each lender receives. Small drafting differences can compound.
Swiss corporate implementation
Conversion into Swiss shares requires the correct capital-increase and set-off mechanics. Articles, approvals, subscription rights and commercial-register steps should be checked early.
When the standard analysis changes
- Several lenders invest at different times or under different side letters.
- The company already has an employee pool, options, promised equity or prior convertibles.
- The next round may fall below the qualified threshold, close in tranches or not occur.
- An exit, restructuring or liquidity crisis may happen before conversion.
- Cross-border investors, unusual interest, a large lender group or specific tax facts change the review.
- The company is a Swiss GmbH, uses foreign-currency share capital, a capital band or conditional capital.
Pre-signing checklist
The commercial decision and the legal implementation should show the same result before the CLA is signed.
- 01
Define the financing objective
Record the amount, runway, milestone and credible next financing point.
- 02
Reconcile the cap table
Bring together the share register, issued shares, pool, options, equity promises and every existing financing instrument.
- 03
Test conversion events
Run a qualified round, a smaller round, no round, exit and maturity.
- 04
Model the pricing formula
Calculate cap, discount, interest, capitalization definition and conversion sequence in one transparent waterfall.
- 05
Separate ownership and control
Review dilution, board, consent, information and follow-on rights on distinct tracks.
- 06
Plan implementation
Identify the required articles, approvals, subscription-right treatment, set-off and commercial-register work.
- 07
Check tax and lender facts
Review discount, interest, lender number and structure, and cross-border facts for the transaction.
- 08
Document the result
Prepare a post-conversion cap table and a short list of unresolved assumptions for the negotiation.
Common Swiss CLA mistakes
Template before outcome
The parties begin with a model before agreeing the financing objective, next-round path and intended founder or investor outcome.
Ambiguous qualified round
Threshold, instrument or closing is too open to tell when mandatory conversion occurs.
Cap without a denominator
A headline cap is negotiated without defining pre-/post-money logic, pool treatment and fully diluted capitalization.
Interest and sequence omitted
The model uses principal only while accrued interest and several conversions create additional shares.
Foreign SAFE copied unchanged
A US document is used without adapting Swiss conversion, capital increase, tax and corporate mechanics.
No maturity plan
The next round is treated as certain, leaving repayment, extension, conversion and liquidity disconnected.
Convertible loans in Switzerland: FAQ
What is a Swiss convertible loan?
It is debt that can or must convert into shares or quotas at contractually defined events, commonly the next qualified equity financing.
When does a convertible loan make sense?
Usually when a startup needs runway quickly and the parties do not want to fix a full valuation today. Investor group, existing instruments, timing and the credibility of the next financing still matter.
How do a valuation cap and discount interact?
Both may reduce the conversion price. The agreement determines which method applies, so cap, discount and capitalization definition must be tested in the same scenarios.
When does founder dilution occur?
The legal ownership change occurs when conversion shares are issued. The expected economic dilution should be modelled when the CLA is signed, using a fully diluted cap table.
What happens if no financing round occurs?
The maturity and no-round provisions control the outcome. Repayment, extension, voluntary or mandatory conversion, or another agreed result may apply and must fit the company’s liquidity position.
Does conversion require Swiss corporate steps?
Yes. Turning the loan claim into Swiss equity requires the appropriate corporate implementation, regularly including capital-increase, approval and commercial-register steps.
Can a US SAFE be used unchanged for a Swiss company?
It should not be assumed to work unchanged. The concept needs to be adapted to Swiss corporate, conversion and tax mechanics and the company’s actual capital structure.
Is an unmodified SECA model sufficient?
No. SECA’s models are valuable market references, but they distinguish investor contexts and leave or illustrate commercial terms. The agreement still needs to fit the transaction, articles and cap table.
Primary sources and legal review
- SECA CLA Model Documentation (Long Form), February 2025
- Federal Council: revised company law effective 1 January 2023
- EHRA Practice Note 2/23 on capital increases and set-off
- Federal Tax Administration: conversion-discount guidance, 22 April 2025
Last legally reviewed: 17 July 2026
This page provides general information, not legal or tax advice. Examples are hypothetical, simplified and do not describe a client matter. Structure, tax treatment and implementation depend on the company, documents, lenders and transaction.