F. Participation in the success of the venture
An instrument that allows an investor to participate in the profits of the issuer is not necessarily inconsistent with a creditor-debtor relationship. Indeed, this is quite common, particularly in the case of convertible debentures. However, if the issuer makes the deal too sweet (i.e too good to resist) by providing a specified conversion ratio that is virtually certain to be exercised, the instrument will be viewed as equity and not debt. Furthermore, if the assets from which an instrument is to be satisfied are insignificant relative to the purported debt, it would appear that the instrument is more like equity as payment would be dependent upon the upside potential of the assets.
G. Participation in control
Some courts have stated that the right to participate in management and the right to vote are generally indicative of equity than debt. Though many courts have analyzed these factors in dictum, they have rarely stressed these factors in determining debt/equity status, making it no more than a marginal factor. In the United States it is very common to find debt agreements that impose restrictions on business matters such as the payment of dividends, major acquisitions and granting creditors a seat on the board of directors.
H. The name of the instrument
Although the nomenclature used to describe an instrument is not conclusive, it is an important factor that should not be ignored. Courts are sometimes reluctant to allow the issuer and investor to repudiate the label chosen by them.