Texas Convertible Promissory Note Overview
A convertible promissory note in Texas 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 Texas's state securities laws. The primary state exemption is: Section 4001 exemption.
Texas requires Form D filing required when issuing convertible notes. The state provides enhanced protections for note holders through its securities regulatory framework. The interest rate must comply with Texas's 18% usury limit, though most convertible note rates (2-8%) fall well below this threshold. Companies should work with an attorney familiar with Texas securities law to ensure full compliance.
Available
Securities exemption
Required
SOS filing
18%
Usury rate
Enhanced
Investor protections
Texas Requirements
Texas has specific requirements for convertible promissory notes that both parties should understand before entering into the agreement.
- Interest Rate: Must not exceed Texas's usury limit of 18%
- 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 Texas law
- Governing Law: The note should specify Texas as the governing jurisdiction
How to Create a Texas Convertible Promissory Note
Follow these steps to create a Texas-compliant convertible promissory note using our template.
Enter Party Information
Provide the full legal names and Texas 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 Texas's 18% 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 Texas 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 Texas's recording office.
Securities Compliance in Texas
When issuing convertible promissory notes in Texas, you must comply with the state securities exemption (Section 4001 exemption), file the required Form D filing required, ensure the interest rate stays within the 18% usury limit, and follow Texas's investor protection requirements (enhanced protections). Federal Form D must be filed with the SEC within 15 days of the first sale. Our Texas-specific template ensures compliance with both state and federal securities regulations.
Texas Usury Warning
Texas's usury limit is 18%. Charging interest above this rate can render your promissory note unenforceable and may subject the lender to penalties under Texas law. Our template automatically validates your interest rate against Texas's current limits.
Texas Convertible Promissory Note FAQ
Answers to common questions about convertible promissory notes in Texas.
Official Texas Resources
Use these official resources to verify Texas requirements for your convertible promissory note.
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Create your Texas Convertible Promissory Note in under 5 minutes.
Answer a few questions and download a Texas-compliant document, ready for the state agency.