Convertible Note & Cap Table Math Guide for Georgia

What this calculator does

DocketMath’s Convertible Note & Cap Table Math Guide for Georgia calculator helps you model how a convertible note converts into equity and how that conversion affects a cap table—so you can see ownership dilution and the resulting post-conversion share structure.

In practice, the tool computes (based on the inputs you provide):

• Conversion price under common note terms (e.g., discount and/or valuation cap)
• Number of shares issued upon conversion
• Updated ownership percentages for:

  • noteholders (new equity)
  • existing shareholders (dilution)
  • the fully converted cap table view

Georgia timing context (general SOL reference)

Separately, if you’re tracking legal timelines in Georgia, the general statute of limitations is:

• 1 year under O.C.G.A. § 17-3-1
  Source: https://law.justia.com/codes/georgia/2021/title-17/chapter-3/section-17-3-1/?utm_source=openai

The dataset indicates no claim-type-specific sub-rule was found. In other words, this “1 year” is the general/default period, not a special rule for a particular type of claim.

To start modeling immediately, use the tool here: /tools/convertible-note-cap-table.

When to use it

Use DocketMath when you’re working on Georgia-focused workflows (or any process involving a Georgia entity, investors in a Georgia company, or Georgia-related dispute timelines you’re documenting).

1) Financing planning and diligence

You need a quick, consistent way to answer:

• “If this note converts, how many shares will the noteholder receive?”
• “What’s the new ownership for founders and the noteholder?”
• “Does the valuation cap or discount drive the conversion price in my scenario?”

2) Term sheet comparisons

If you’re comparing proposed note structures, the calculator helps you see the mechanical differences between:

• discount-only vs. cap-only vs. cap + discount
• higher vs. lower cap values
• different conversion triggers and conversion price assumptions

3) Cap table updates after conversion

When the note converts (or you expect conversion), you need:

• a clear pre vs. post ownership breakdown
• an “expected outcome” cap table snapshot for internal review (e.g., board or investor materials)

4) Timing and dispute documentation (general SOL reference)

If your analysis is also part of a broader governance or dispute-prevention effort, keep Georgia’s general limitations reference in mind:

• Georgia general SOL period: 1 year under O.C.G.A. § 17-3-1 (default/general)

Step-by-step example

Below is a straightforward example you can mirror in DocketMath to see how the cap table math works.

Scenario

Pre-conversion capitalization

• Founder A: 2,000,000 shares
• Founder B: 1,000,000 shares
• Total pre-conversion shares: 3,000,000

Convertible note

• Principal (amount to convert): $500,000
• Discount: 20%
• Valuation cap: $4,000,000

Priced financing assumption (baseline for conversion)

Assume a priced financing implies the company valuation of $5,000,000 pre-money.
For this educational example, we treat the implied per-share baseline conversion price as derived from that valuation and the pre-money share count.

Step 1: Compute the baseline price per share

• Baseline (implied) valuation: $5,000,000
• Pre-money shares: 3,000,000

Baseline price per share = $5,000,000 / 3,000,000 = $1.6667/share

So if there were no cap or discount mechanics, the note would convert at $1.6667/share.

Step 2: Apply discount (20%)

Discounted conversion price = $1.6667 × (1 − 0.20)
= $1.6667 × 0.80
= $1.3333/share

Step 3: Apply valuation cap

Cap conversion price depends on how many shares are used as the cap denominator in your note mechanics. For this example:

• Cap value: $4,000,000
• Pre-money shares: 3,000,000

Cap-based price = $4,000,000 / 3,000,000 = $1.3333/share

In this example, the cap price equals the discounted price.

Step 4: Choose the conversion price per note rule

Common note terms convert at the more favorable (lower) price to the noteholder. Here:

• Discount-based price: $1.3333
• Cap-based price: $1.3333
• Resulting conversion price: $1.3333/share

Step 5: Compute shares issued to the noteholder

• Note principal: $500,000
• Conversion price: $1.3333/share

Shares issued = $500,000 / $1.3333 ≈ 375,000 shares
(Exact share counts can vary slightly due to rounding conventions.)

Step 6: Update the cap table

Post-conversion total shares:

• Pre shares: 3,000,000
• Note shares: +375,000
• Total post shares: 3,375,000

Post-ownership percentages:

• Founder A: 2,000,000 / 3,375,000 = 59.26%
• Founder B: 1,000,000 / 3,375,000 = 29.63%
• Noteholder: 375,000 / 3,375,000 = 11.11%

Step 7: Validate key outputs

When you run the same numbers in DocketMath, verify these expected relationships:

• Noteholder shares increase when:

  • principal increases
  • conversion price decreases (for example, stronger cap/discount effects)
• Existing shareholder percentages decrease due to dilution

  • more note shares → less percentage for everyone else

For your workflow, start with: /tools/convertible-note-cap-table.

Common scenarios

Convertible notes come in many variants. DocketMath is most useful when you’re translating term sheet details into consistent inputs. Here are common scenarios and how the outputs typically change.

Scenario A: Cap-only (discount = 0%)

What you change in the tool

• Set discount to 0%
• Provide a valuation cap

Expected effect on outputs

• Conversion price is driven by the cap (if the implied valuation exceeds the cap)
• Noteholder shares become:

  • higher when the cap is lower (more favorable to noteholders)

Scenario B: Discount-only (cap = none / 0%)

What you change in the tool

• Clear or set valuation cap to 0 / blank (use the tool’s input conventions)
• Provide a discount rate

Expected effect on outputs

• Conversion price = baseline price × (1 − discount)
• Noteholder shares increase as discount increases

Scenario C: Cap + discount (choose the better price)

What you change in the tool

• Provide both discount and valuation cap

Expected effect on outputs

• The calculator selects the more favorable conversion price for the noteholder (based on how the note defines it)
• Either:

  • cap “wins” when cap-implied price is lower than discounted-implied price
  • discount “wins” when discount-implied price is lower than cap-implied price

Scenario D: Multiple notes (stacked dilution)

What you change in the tool

• Add multiple notes as separate rows (principal, cap, discount per note)

Expected effect on outputs

• Total noteholder ownership equals the sum of each note’s converted shares divided by the post-total shares
• Existing shareholder dilution compounds across multiple conversion events

Scenario E: Different “baseline valuation” assumptions

Conversion math can depend on how the baseline valuation and share count are used to calculate the conversion price basis.

What you change in the tool

• Update the financing valuation or baseline inputs (depending on tool design)

Expected effect on outputs

• If baseline valuation rises above the cap:

  • the cap is more likely to control
• If baseline valuation is below the cap:

  • the cap may be irrelevant, and discount can still matter

Scenario F: Modeling a “1-year horizon” for disputes (general reference)

If the note becomes contentious—e.g., a claim alleging breach or misrepresentation—you might document a general timeline reference for Georgia:

• O.C.G.A. § 17-3-1: general/default limitations period of 1 year

Tips for accuracy

• Enter the same share base consistently. Many conversion mechanics depend on a share count (often “pre-money shares” or an equivalent defined base). Use the same base across baseline, cap, and conversion price calculations.
• Mirror the note’s “conversion price” rule. If the note chooses the more favorable of cap vs. discount

Related reading

• Inputs you need for convertible note cap table math in United States (Federal) — Input checklist with sourcing guidance
• Worked example: convertible note cap table math in North Carolina — Worked example with real statute citations
• Convertible note cap table math in New Hampshire — Full how-to guide with jurisdiction-specific rules