SAFE or Convertible Loan? Belgium and the Netherlands

If you are raising pre-seed in Belgium or the Netherlands, the default instrument is a convertible loan, not a SAFE. The reason is structural rather than cultural: shares in a Belgian BV/SRL or a Dutch BV are issued by notarial deed, so no contract can turn itself into equity automatically the way a US SAFE is designed to. Belgium's Companies and Associations Code provides for convertible instruments directly, at article 5:122 for the BV/SRL and article 7:180 for the NV/SA, and conversion still runs through a notary.

That single fact reshapes the choice. In the US, the argument for a SAFE is that it removes paperwork. In the Benelux, the paperwork you were hoping to remove arrives anyway, just later. So the decision is not really "simple versus complex". It is about what the investor holds in the meantime, and what happens if the next round never comes.

What is the actual difference between a SAFE and a convertible loan?

A convertible loan is debt. The investor lends money, usually with an interest rate and a maturity date, and has a creditor's claim against the company until the loan converts into shares. A SAFE is not debt. It is a contractual right to receive shares in the future, normally with no interest and no maturity date, so the investor has no repayment claim to fall back on.

In the Netherlands you will also meet two local SAFE-like instruments. EPOS stands for Easy Prepayment on Shares, and ASAP works on a similar principle: the investor pays now for a contractual right to shares later, without the loan mechanics. KISS, or Keep It Simple Security, is another US-origin form, and depending on the version it can look like either a SAFE or a convertible loan.

The practical question underneath all of them is the same. If your company does not raise again and does not get acquired, does the investor have a claim for their money back, or only a right to shares in a company that is not raising? With a loan, there is a claim and a maturity date. With a SAFE, generally there is not.

Why do Dutch and Belgian startups use convertible loans more than SAFEs?

Because the notarial step is unavoidable, so the headline simplicity of a SAFE does not survive contact with a BV.

In the Netherlands, issuing shares in a BV requires a notarial deed of issuance, alongside the corporate approvals and the handling of pre-emption rights. Practitioners describe the convertible loan as the most familiar instrument in the Dutch market, precisely because it defers the notarial cost to the moment of conversion rather than removing it. A SAFE does not change that: when it converts, the same deed is required.

In Belgium, the position is at least as formal. Converting into shares means a capital increase, and a capital increase is formalised by notarial deed. Belgian practitioners summarise it bluntly: no notary, no shares. The board is also expected to produce a report justifying the transaction, and where the loan converts as a contribution in kind, an auditor reports on the valuation under article 5:133 for the BV/SRL or article 7:197 for the NV/SA.

None of this makes a SAFE impossible in the Benelux. It makes an unmodified US SAFE a poor fit. If you want SAFE-like economics here, the sensible route is an instrument drafted around BV mechanics from the start, which is what EPOS and ASAP are for, rather than a US template with the jurisdiction swapped in the header.

Does the FSMA warning about convertible bonds apply to my startup?

Almost certainly not, and this is worth being precise about because it gets quoted loosely.

On 1 February 2023 the FSMA, Belgium's financial regulator, warned about convertible bond issues by companies in need of financing. The warning is aimed at listed companies in financial difficulty. The FSMA identified nine companies under its supervision relying on such instruments, most of them biotech or medtech. Its concern was that conversion often results in significant dilution for existing shareholders and can put downward pressure on the share price, and it asked listed companies and their directors to think carefully about the responsibility they take on.

An unlisted startup raising a pre-seed convertible loan from angels or a fund is not what that warning addresses. The underlying lesson still transfers, though, and it is the one founders most often learn late: a convertible instrument postpones the dilution conversation, it does not shrink it. The discount and the cap are the price of that delay.

What terms actually matter on a convertible instrument?

Four, and they interact more than founders expect.

The valuation cap. The maximum valuation at which the money converts. This is usually the term with the largest effect on your final ownership, and it is the one worth negotiating hardest. Our guide to pre-seed valuation covers how to think about the number itself.

The discount. A percentage off the next round's price, rewarding the investor for coming in earlier. Where both a cap and a discount exist, conversion normally applies whichever is better for the investor, so assume both will bind against you.

Interest, on a loan. It accrues and usually converts alongside the principal, so it quietly increases the number of shares issued. In Belgium, interest payments generally attract 30% withholding tax (roerende voorheffing / précompte mobilier) unless an exemption applies, and accrued interest that is capitalised and converted keeps its character as movable income. Settle in the contract how accrued interest is treated before the notary appointment rather than after.

Maturity. What happens if no qualifying round occurs before the date. Repayment, automatic conversion at a default valuation, or an extension by agreement. Founders routinely sign an 18-month maturity on the assumption that the Series A will arrive in 12. If it does not, the maturity clause, not the cap, becomes the most important sentence in the document.

On the tax treatment of the conversion itself, Belgian practitioners describe it as a capital increase that is not a taxable event for the company. Treatment varies by the lender's own position and residence, so this is firmly a question for your adviser rather than a blog.

When does a priced round beat either instrument?

When the valuation argument is winnable now, and when the cap table is about to get complicated.

Convertibles are genuinely useful in two situations: you need money faster than a priced round can close, or you and the investor cannot agree on a valuation and both prefer to let the next round decide. Outside those, stacking several convertibles with different caps and discounts creates a cap table that nobody can model reliably, including you. We have seen rounds where the founders could not say, within ten percentage points, what they would own after conversion.

A useful discipline: before signing, build the conversion table for the next round at three valuations, a disappointing one, an expected one and a good one. If the disappointing case takes you below where you are comfortable, the cap is wrong, not the spreadsheet. The same arithmetic matters when you compare pre-seed and seed expectations, and it feeds directly into the term sheet you will eventually negotiate.

Frequently asked questions

Can a Dutch BV use a US-style SAFE unchanged? In practice, no. Shares in a BV are issued by notarial deed, with corporate approvals and pre-emption rights to handle, so a US SAFE that assumes automatic conversion does not map onto Dutch mechanics. Dutch SAFE-like instruments such as EPOS and ASAP exist because they are drafted around BV reality from the start.

Does a convertible loan avoid the notary in Belgium? It defers the notary, it does not avoid it. The loan itself can be signed privately, but converting it into shares is a capital increase and that is formalised by notarial deed, together with a board report and, for a contribution in kind, an auditor's report.

Is the FSMA warning on convertible bonds relevant to pre-seed startups? It is aimed at listed companies in financial difficulty, not unlisted startups. The FSMA issued it on 1 February 2023 and identified nine supervised companies, mostly biotech and medtech. The general point about dilution is still worth absorbing.

What happens if the convertible loan reaches maturity and no round has happened? That depends entirely on the maturity clause you signed. The usual options are repayment, conversion at a pre-agreed default valuation, or an extension by mutual agreement. Read that clause before the cap, because it is the one that binds in the scenario founders plan for least.

Should interest on a convertible loan be paid in cash or capitalised? Both are used, and the choice has tax consequences in Belgium, where interest generally attracts 30% withholding tax and capitalised accrued interest keeps its character as movable income. Agree the treatment in the contract rather than discovering it at conversion.