California Convertible Promissory Note Overview
A convertible promissory note in California is a debt instrument commonly used in startup financing that converts into equity upon a triggering event. As a security, it must comply with both federal regulations (SEC Rule 506 under Regulation D) and California's state securities laws. The primary state exemption is: Section 25102(f) exemption.
California requires Form D + 25102(f) notice when issuing convertible notes. The state provides strongest protections for note holders through its securities regulatory framework. The interest rate must comply with California's 10% usury limit, though most convertible note rates (2-8%) fall well below this threshold. Companies should work with an attorney familiar with California securities law to ensure full compliance.
Available
Securities exemption
Required
SOS filing
10%
Usury rate
Strongest
Investor protections
California Requirements
California has specific requirements for convertible promissory notes that both parties should understand before entering into the agreement.
- Interest Rate: Must not exceed California's usury limit of 10%
- Written Agreement: Must be in writing and signed by the borrower (maker)
- Clear Terms: Principal amount, interest rate, payment schedule, and maturity date must be clearly stated
- Default Terms: Late fees, grace periods, and acceleration clause must comply with California law
- Governing Law: The note should specify California as the governing jurisdiction
How to Create a California Convertible Promissory Note
Follow these steps to create a California-compliant convertible promissory note using our template.
Enter Party Information
Provide the full legal names and California addresses of both the lender (payee) and borrower (maker). Include the date the note is being executed.
Define Loan Terms
Specify the principal amount, interest rate (within California's 10% usury limit), payment schedule, and maturity date. Our template calculates the payment breakdown automatically.
Set Default and Late Payment Terms
Define the grace period, late fee amount, acceleration clause triggers, and notice requirements. Our California template includes compliant default language.
Sign and Execute
The borrower must sign and date the note. Consider notarization for added legal protection. Both parties should retain a copy. If secured by collateral, file the appropriate security instrument with California's recording office.
Securities Compliance in California
When issuing convertible promissory notes in California, you must comply with the state securities exemption (Section 25102(f) exemption), file the required Form D + 25102(f) notice, ensure the interest rate stays within the 10% usury limit, and follow California's investor protection requirements (strongest protections). Federal Form D must be filed with the SEC within 15 days of the first sale. Our California-specific template ensures compliance with both state and federal securities regulations.
California Usury Warning
California's usury limit is 10%. Charging interest above this rate can render your promissory note unenforceable and may subject the lender to penalties under California law. Our template automatically validates your interest rate against California's current limits.
California Convertible Promissory Note FAQ
Answers to common questions about convertible promissory notes in California.
Official California Resources
Use these official resources to verify California requirements for your convertible promissory note.
Other California Promissory Note Types
Need a different type of promissory note for California? We offer state-specific templates for every type of promissory note.
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Create your California Convertible Promissory Note in under 5 minutes.
Answer a few questions and download a California-compliant document, ready for the state agency.