Who can amend a convertible note or SAFE?
Takeaway: Amending a convertible note or SAFE is a formal legal process that requires the written consent of not only the company but also a majority of the noteholders or SAFE holders, giving your early investors significant leverage over any proposed changes.
A convertible note or a SAFE is a binding legal contract. Once you have signed the agreement and the investor has wired their funds, you cannot unilaterally change the terms of the deal. The valuation cap, the discount, and the maturity date are all locked in. If circumstances change and you need to modify the agreement, you must go through a formal amendment process.
This process requires you to get the consent of your investors. This is a critical protection for them and a key point of leverage that founders must understand.
The "Majority Rules" Provision
Every well-drafted convertible note purchase agreement or SAFE will contain a specific clause that outlines the procedure for amendments. The standard and near-universal rule is that any amendment requires the written consent of two parties:
The Company (acting through its Board of Directors).
The holders of a majority of the principal amount of the notes or the total investment amount of the SAFEs issued in that round.
What This Means in Practice
This "majority rules" provision means you do not need to get every single investor to agree to the change. You only need to get the investors who represent more than 50% of the capital in that round to sign off.
The Role of the Lead Investor: In practice, this often means that the negotiation happens with your lead investor or a small handful of your largest investors. If you can convince the investor who put in the most money to agree to the amendment, they may already represent a significant portion of the required majority. Once the lead investor is on board, the other smaller investors in the round will typically follow their lead.
Common Scenarios for Amendments
Extending a Maturity Date: This is the most common reason to amend a convertible note. If you are approaching the maturity date and are not yet ready to raise a priced round, you will need to formally ask your noteholders to agree to an amendment that extends the date.
Changing the Valuation Cap: If a fundraising round is proving difficult to close, you might decide to "sweeten" the deal by lowering the valuation cap to attract new investors. To be fair to the investors who have already signed, you would need to amend their existing notes or SAFEs to give them the benefit of the new, lower cap.
Modifying Conversion Terms: In a complex or non-standard priced round, it may be necessary to amend the convertible instruments to clarify how they will convert into the new series of preferred stock.
The amendment provision is a powerful reminder that your seed investors are your long-term partners. They have real contractual rights, and their consent is required to make any changes to the core terms of their investment.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.