What Is the Maturity Date?
Every convertible note has a maturity date — the date on which the principal and accrued interest become due and payable. Typical maturity is 18 to 24 months from issuance, designed to give the company enough runway to raise a priced round that triggers automatic conversion.
Until the maturity date, the note behaves like a quiet placeholder. Interest accrues (typically 4–8% annually) but is rarely paid in cash; it rolls into the principal balance and converts alongside it at the next round. The cap and discount sit in the note documents waiting for the conversion trigger.
If the maturity date arrives and a qualifying priced round has closed in the interim, the note has already converted and maturity is irrelevant. If no qualifying round has closed, the note's outstanding balance (principal plus accrued interest) becomes a demand obligation — the noteholders can require immediate cash repayment.
What Default Actually Means
Technical default on a convertible note rarely results in immediate enforcement. Noteholders are venture investors, not commercial lenders — they invested expecting equity, not a fixed-income return. They generally do not want to push the company into insolvency to recover principal because doing so destroys the investment thesis.
But the default does create real legal exposure. The note becomes a senior creditor claim above all equity. In an insolvency, noteholders get paid before any shareholder. The company's directors face personal exposure if the company continues to trade while unable to meet liabilities — wrongful trading in the UK, insolvenzverschleppung in Germany, and equivalent doctrines across EU jurisdictions.
The practical effect: maturity creates pressure for the company to do something — extend, convert, or repay — and creates leverage for noteholders to renegotiate terms in their favour. A note maturing without a priced round is one of the highest-stakes governance moments most startups face.
Five Outcomes at Maturity
Outcome 1: Cash repayment. The company repays principal plus accrued interest in cash. Rare in early-stage startups because the cash is almost never available.
Outcome 2: Extension by amendment. Noteholders agree to push the maturity date out by 6–12 months. This requires noteholder consent and is typically offered in exchange for an improved cap (e.g. cap reduced from €10M to €7M), an increased discount (e.g. 20% increased to 30%), or additional warrant coverage.
Outcome 3: Voluntary conversion at a negotiated price. Noteholders agree to convert their balance into preferred or common shares at a price the parties negotiate (in the absence of a priced round). Common reference points: the cap (most favourable to noteholders), a percentage of the cap (compromise), or a fresh negotiated valuation.
Outcome 4: Forced conversion. Some notes include automatic conversion language: at maturity, if no qualifying round has closed, the note converts into a defined class of preferred at the cap. This protects both parties — the company avoids the default, the noteholders get equity at a defined price.
Outcome 5: Default and wind-down. The noteholders demand repayment, the company cannot pay, and the directors must consider insolvency proceedings. Equity is wiped out, noteholders recover whatever the residual asset sale yields.
How to Negotiate an Extension
Start the conversation at least 90 days before maturity. The earlier you engage noteholders, the more options remain on the table. Waiting until 30 days before maturity dramatically narrows the negotiation room and signals distress.
The standard exchange is: extension of maturity by 6–12 months in return for improved noteholder economics. Improvements typically include: a lower cap (more equity per euro at conversion), a higher discount (more equity at the next priced round), warrant coverage (additional shares granted as compensation for the extension), or interest rate increase (higher accrual rate during the extension period).
For the company, the goal is to secure the extension at the lowest economic cost. Approach noteholders individually if possible — the first one to agree sets a market that others tend to follow. Document the extension in a written amendment signed by every noteholder; partial extensions where some noteholders refuse create governance chaos.
Converting at Maturity Without a Triggering Event
If the note does not have automatic conversion language and the parties prefer not to extend, voluntary conversion at maturity is the cleanest exit. The price is negotiated, the note converts to equity, and the company's balance sheet is cleared.
The most common reference price for voluntary conversion is the cap, sometimes with a discount applied (10–20% off the cap). This rewards the noteholder for taking early-stage risk while keeping the company's effective dilution manageable. The conversion class is usually a new "shadow" preferred that mirrors the next institutional round, or a defined "Note Conversion Preferred" with specified rights.
Companies should bring this proposal forward proactively rather than waiting for noteholders to demand it. A clean voluntary conversion preserves relationships and demonstrates founder competence — qualities that matter when the same noteholders consider following on in the priced round that eventually arrives. See [convertible notes and SAFEs](/captable/convertible-notes-safes) and [convertible loan agreement](/captable/convertible-loan-agreement) for the underlying instruments and [bridge rounds](/captable/bridge-rounds) for the broader bridge financing framework.