Convertible Note & Cap Table Math Guide for North Carolina

What this calculator does

DocketMath’s Convertible Note & Cap Table Math Guide for North Carolina is paired with the convertible-note-cap-table calculator. Together, they help you run the core equity math behind a convertible note in a way that’s easier to audit than spreadsheet work.

Specifically, the calculator supports the typical workflow below:

• Convert note principal (and optionally accrued interest) into shares
• Apply a conversion price derived from one of these common mechanisms:

  • Discount to the next priced round (e.g., 20% off)
  • Valuation cap (e.g., cap at $6,000,000 pre-money)
• Compute resulting ownership percentages
• Update a simple cap table after conversion, using:

  • Fully diluted shares outstanding assumptions
  • Any pre-existing options / warrants inputs you include

Because equity math can be “right but not the same right,” the tool emphasizes transparency: if you change the assumed conversion triggers, discount, cap, or share counts, the outputs update accordingly so you can see which inputs drive the result.

When to use it

Use the DocketMath convertible-note-cap-table calculator when you need to estimate (or reconcile) how a convertible note will affect ownership under scenarios like these:

• You’re modeling a priced equity round and want to see how noteholders convert.
• You’re comparing outcomes across alternative terms (cap vs. discount; interest included vs. excluded).
• You’re preparing investor materials and need a clean, repeatable cap table basis for discussion.
• You’re sanity-checking an attorney’s or CFO’s cap table math by re-running the same assumptions.

North Carolina context (timing and default legal limits)

This guide does not apply a special, convertible-note-specific timing rule. Instead, the jurisdiction-specific piece uses the general/default statute of limitations baseline you provided:

• General SOL Period: 3 years

You also provided “SAFE Child Act” as a named General Statute entry, but it does not specify any claim-type-specific sub-rule for convertible note disputes within the jurisdiction data you supplied.

So, for statute-of-limitations timing, treat the “general/default period” as the applicable baseline rather than assuming a special shorter/longer period exists for every possible securities or contract claim.

Step-by-step example

Below is a worked example showing how the calculator’s math typically flows. Even if your note uses different definitions (e.g., “Qualified Financing”), the underlying mechanics you’re modeling are similar.

Example assumptions (all numbers are illustrative)

Let’s assume:

• Convertible note principal: $500,000
• Note interest: 8% simple annual, assumed 0 accrued years for this snapshot (so accrued interest = $0)
• Valuation cap: $6,000,000
• Discount rate: 20%
• Next priced round:

  • Pre-money valuation: $10,000,000
  • Implied issuance price per share (modeled simply as):

    • Fully diluted post-money shares target: 2,000,000
    • Price per share = $10,000,000 / 2,000,000 = $5.00
• Current cap table baseline (pre-conversion):

  • Fully diluted shares outstanding before this round: 1,600,000
  • You input reserved pools (options/warrants) if you track them as separate line items in the calculator.

Step 1: Compute the next round implied conversion price (discount path)

Discount to the next round price of $5.00 at 20%:

• Discounted price = $5.00 × (1 − 0.20) = $4.00/share

Step 2: Compute the cap-based conversion price (cap path)

A valuation cap translates into an alternate effective share price.

If the cap is $6,000,000 pre-money and we treat it as an equivalent price basis against the next round’s share count basis:

• Cap implied price = cap / (next round fully diluted share basis)
• Using the modeling assumption of 2,000,000 shares as the basis:

  • Cap implied price = $6,000,000 / 2,000,000 = $3.00/share

Step 3: Choose the better conversion price (typical “lower price wins” logic)

Common market terms apply whichever produces more shares (i.e., the lower conversion price):

• Conversion price = min($4.00, $3.00) = $3.00/share

Step 4: Convert note into shares

Total conversion amount (principal + accrued interest):

• Conversion amount = $500,000 + $0 = $500,000

Shares issued on conversion:

• Shares = $500,000 / $3.00 = 166,666.67 shares

The calculator may apply rounding rules based on its design (for modeling, you may see whole shares and adjusted residuals).

Step 5: Update ownership in the cap table

If you start with 1,600,000 fully diluted shares pre-conversion, then after conversion:

• New fully diluted shares = 1,600,000 + 166,666.67 = 1,766,666.67
• Noteholder ownership = 166,666.67 / 1,766,666.67 ≈ 9.44%

Existing holders dilute accordingly based on the updated fully diluted share total.

How changes would show up in the calculator

Use the same example and adjust just one input at a time:

• Increase valuation cap from $6M to $8M
  → cap implied price increases, conversion price likely moves up, shares decrease, ownership decreases.
• Increase discount from 20% to 30%
  → discounted price drops, shares increase (unless the cap remains the more favorable option).
• Add accrued interest (e.g., $40,000 at conversion)
  → conversion amount rises, shares rise proportionally.

This “sensitivity” is the practical value of running the DocketMath tool—your outputs aren’t static, and you can explain which term changed the result.

Common scenarios

Convertible notes come with many variations. The DocketMath calculator typically shines most when you can map your note’s conversion trigger into one of these modeling patterns.

1) Discount-only notes

If the note has:

• No valuation cap
• Only a discount (e.g., 20%)

Then the conversion price is driven by the discounted next round price. In practice:

• Higher discount → lower conversion price → more shares → higher ownership for noteholders.

2) Cap-only notes

If the note has:

• Valuation cap, but no discount

Then the conversion price tracks the cap-based effective share price.

• Higher cap (less restrictive) → higher conversion price → fewer shares.

3) Cap + discount notes

Most complex (and most common) for modeling.

Typically:

• Calculate both prices (cap-implied and discount-implied)
• Pick the option that benefits noteholders most (usually more shares, meaning lower price)

4) Notes with interest included in conversion

Some notes convert:

• Principal only
• Or principal + accrued interest

If your calculator includes an interest field, your main modeling decision is:

• How many days/years accrued up to conversion?
• Whether compounding exists (simple vs. compound interest)

Even modest interest can materially change share counts for large notes.

5) Rounding and share definition effects

Convertible note math often ends in fractional shares. Real documents may require:

• Rounding down/up
• Share delivery mechanics
• Residual adjustments

Cap tables can differ by:

• Fractions handled differently
• Rounding applied before vs. after a percentage calculation

Treat differences as a modeling “policy” choice, not a purely mathematical error.

Tips for accuracy

To keep DocketMath outputs reliable, focus on input hygiene and definitional alignment.

Input checklist (quick wins)

If you use “pre-money valuation” for conversion price math, don’t mix it with a “post-money” assumption elsewhere. Some models rely on fully diluted shares; others anchor to issued shares. Match the definition your note uses. Then keep that assumption constant across scenarios. If they’re “already included” in your baseline shares, don’t add them again. If the tool rounds to whole shares, note the direction and compare consistently across iterations.

Sanity checks you can run in seconds

• If you increase the valuation cap, should noteholder ownership usually decrease?
  In a cap+discount system where the cap is controlling, yes.
• If you increase the discount rate, should conversion price typically drop?
  That should generally increase noteholder shares, unless the cap still controls.
• If you increase principal, does noteholder ownership scale roughly linearly?
  It should, with dilution effects based on your share base.

Where to run the calculator

Start here: **convertible-note-cap-table

Sources and references

Start with the primary authority for North Carolina and confirm the effective date before relying on any output. If the rule has been amended, update the inputs and rerun the calculation.

• N.C. Gen. Stat. § 24-1

Related reading

• Inputs you need for convertible note cap table math in United States (Federal) — Input checklist with sourcing guidance
• Convertible note cap table math in New Hampshire — Full how-to guide with jurisdiction-specific rules
• Spreadsheet checks before running convertible note cap table math in Singapore — Spreadsheet validation before import