Delaware Convertible Promissory Note Overview
A convertible promissory note in Delaware 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 Delaware's state securities laws. The primary state exemption is: Section 7309 exemption.
Delaware requires Form D filing required when issuing convertible notes. The state provides business-friendly for note holders through its securities regulatory framework. The interest rate must comply with Delaware's 5% over Fed usury limit, though most convertible note rates (2-8%) fall well below this threshold. Companies should work with an attorney familiar with Delaware securities law to ensure full compliance.
Available
Securities exemption
Required
SOS filing
5% over Fed
Usury rate
Business-friendly
Investor protections
Delaware Requirements
Delaware has specific requirements for convertible promissory notes that both parties should understand before entering into the agreement.
- Interest Rate: Must not exceed Delaware's usury limit of 5% over Fed
- 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 Delaware law
- Governing Law: The note should specify Delaware as the governing jurisdiction
How to Create a Delaware Convertible Promissory Note
Follow these steps to create a Delaware-compliant convertible promissory note using our template.
Enter Party Information
Provide the full legal names and Delaware 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 Delaware's 5% over Fed 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 Delaware 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 Delaware's recording office.
Securities Compliance in Delaware
When issuing convertible promissory notes in Delaware, you must comply with the state securities exemption (Section 7309 exemption), file the required Form D filing required, ensure the interest rate stays within the 5% over Fed usury limit, and follow Delaware's investor protection requirements (business-friendly). Federal Form D must be filed with the SEC within 15 days of the first sale. Our Delaware-specific template ensures compliance with both state and federal securities regulations.
Delaware Usury Warning
Delaware's usury limit is 5% over Fed. Charging interest above this rate can render your promissory note unenforceable and may subject the lender to penalties under Delaware law. Our template automatically validates your interest rate against Delaware's current limits.
Delaware Convertible Promissory Note FAQ
Answers to common questions about convertible promissory notes in Delaware.
Official Delaware Resources
Use these official resources to verify Delaware requirements for your convertible promissory note.
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Create your Delaware Convertible Promissory Note in under 5 minutes.
Answer a few questions and download a Delaware-compliant document, ready for the state agency.