Convertible bonds are bonds that the investor can convert into shares of the issuer, under term and price conditions agreed when they are issued. They combine debt today and equity tomorrow. In Spain only the sociedad anónima can issue them: the sociedad limitada is prohibited from doing so by article 401 of the Ley de Sociedades de Capital.
How a convertible bond works
The issuer places debt with a coupon, usually lower than that of a plain bond, because the investor also receives the option to convert. The conversion ratio sets how many shares correspond to each bond, with a fixed price or a discount to a reference. If the investor does not convert, they receive the principal at maturity as with any bond.
For the issuer the appeal is twofold: it finances more cheaply than with pure debt and defers dilution until conversion. The cost is uncertainty about the future cap table. Model the conversion scenarios before setting the terms, not after placing the paper.
The terms that concentrate the negotiation are few: coupon, term, conversion ratio or price, exercise windows and anti-dilution protections. Each one shifts the distribution of value between current shareholders and investors; none is neutral.
Convertible bond and convertible note: similar, not the same
In early rounds almost everyone says «convertible» referring to the convertible note, which is a loan agreement between the company and a specific investor. The convertible bond is something else: a security issued in series, intended to be placed among multiple investors. The confusion is not harmless, because the legal regime and who can issue change completely.
| Criterion | Convertible note | Convertible bond |
|---|---|---|
| Nature | Bilateral loan agreement | Security issued in series |
| Who can use it | Public and private limited companies | Only public limited companies |
| Formalities | Private agreement; advisable to execute it as a public deed | Shareholders' meeting resolution and corporate requirements for issuance |
| Investors | Few, negotiated one by one | Multiple, organized placement |
Practical rule: if you run an SL and an investor proposes convertible debt to you, your available instrument is the convertible note, not the convertible bond.
The corporate limit: why an SL cannot issue them
The Ley de Sociedades de Capital bars the limited liability company from issuing convertible bonds into equity interests. Since the reform of Ley 5/2015, an SL can issue straight bonds, with its own limits, but the prohibition on convertibles remains (art. 401.2, Real Decreto Legislativo 1/2010).
The public limited company that issues them is not free either: the general meeting must set the bases and terms of the conversion and approve the capital increase needed to cover it. These are prior corporate requirements, not subsequent formalities.
The practical consequence: if your financing plan involves placing convertibles in series among several investors, you need to be a public limited company or convert beforehand. That corporate check comes before the financial design of the instrument.
The tokenized version, with caution
A convertible bond is a financial instrument and representing it through tokens does not change its nature (MiFID II, Annex I). The result is a security token subject to securities regulation; MiCA expressly excludes these cases (Regulation (EU) 2023/1114, art. 2.4).
Tokenized issuance requires recording the securities in a register operated by an ERIR, the entity responsible for registration and record-keeping, the digital notary of the book of entries (Ley 6/2023, art. 8; RD 814/2023). The first ERIR authorized in Spain was URSUS-3 Capital, A.V., in November 2024. If the offer is public, the prospectus rules and their exemptions also apply, with the general threshold of 12 million euros in force since June 5, 2026 (Regulation (EU) 2024/2809).
Tokenization does not bypass corporate limits: an SL cannot tokenize what it cannot issue. The correct order is first the corporate structure, then the instrument, and finally the technology layer. The complete process, step by step, is in how to issue a security token in Spain.
Related: subordinated debt and mezzanine.
Are you considering issuing convertible debt and unsure which vehicle and which register you need? Take the issuance diagnostic (2 min) or request a proposal. If you prefer to start by reading, download the 2026 guide.
This content is informative and educational. It does not constitute legal, tax, or investment advice. Check the current version of each regulation in the BOE and on EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
Frequently asked questions
Can a limited liability company issue convertible bonds?
No. Article 401.2 of the Ley de Sociedades de Capital prohibits an SL from issuing convertible bonds into equity interests. Since Ley 5/2015, it can issue straight bonds, but convertible bonds are reserved for the public limited company. The usual alternative for an SL is the convertible note, which is a loan agreement.
How does a convertible note differ from a convertible bond?
The convertible note is a bilateral loan agreement, negotiated with each investor, and both the SA and the SL can use it. The convertible bond is a security issued in series to be placed with multiple investors, with a general meeting resolution and corporate requirements, and only the public limited company can issue it.
What regulations apply to a tokenized convertible bond?
Securities regulations, not MiCA, which excludes crypto-assets that are financial instruments (art. 2.4). Tokenized issuance is registered with an ERIR under Ley 6/2023 and RD 814/2023, and if the offer is public, the prospectus rules and their exemptions apply. The first authorized ERIR was URSUS-3 Capital, in November 2024.
