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A capitalisation table, or cap table, is one of the key sources
of truth for your company’s ownership structure. At its
simplest, it should tell you who owns how many shares, what class
those shares are, and what percentage in the company those shares
represent.
Properly maintaining your cap table will give you and your
investors a clear picture of your ownership and equity structure,
making fundraising easier and helping to prevent any unwelcome
surprises. Your investors will expect your cap table to be accurate
and consistent with the company’s register of members and
Companies House filings, so it is an important thing to get right
and keep on top of.
What goes into a cap table?
At a minimum, a cap table should include the following:
list every shareholder (ideally by their full legal name)
the number of shares that each shareholder holds
the class attaching to the shares (for example, ordinary or
preferred)
the percentage of shares held by each shareholder – this
should be displayed on both an undiluted basis (i.e., counting only
those shares which are actually issued) and a fully diluted basis
(i.e., including any option pool or convertibles)
If you’re planning a raise, an incoming investor would also
expect that your cap table displays the “post-money”
position, being the cap table as it would look assuming investment
closes, reflecting any new investors and changes to your option
plan. This is important so you and your incoming investors have a
clear picture of how the equity and control structures in your
company will look following the investment.
Building your cap table
Start with the founders: record each founder’s name and
shareholding so that the numbers match the incorporation or any
post‑incorporation allotments.
As you start raising money, add your investors to the cap table.
If you have them, record your option pool, making sure to
distinguish between those options which have been allocated to
employees and those which haven’t.
It’s also a good idea to note any convertibles that the
company might have issued, whether those are SAFEs, advance
subscription agreements or convertible loans. Ideally, for each
instrument, you would set out the amount advanced under that
instrument, any valuation cap or discount that might apply upon
conversion, and the longstop (or maturity) date for conversion of
the instrument (if any).
Keep it aligned with your legal records
Founders can often forget that, alongside your cap table, every
company needs to maintain a register of members. Unlike a cap
table, a register of members is a legally required document that
must contain certain information about your company’s
shareholders.
If your cap table and your register of members don’t line
up, an incoming investor’s due diligence may flag it up as an
issue to rectify before they invest, and founders can risk losing
precious time fixing historic issues.
After each share issue, share transfer, change to your option
pool or any other change to your share capital structure, be sure
to update the cap table straight away and keep one “current
version” clearly labelled.
Common snags and how to dodge them
Failing to update the cap table regularly and misallocating
equity confuses investors. Avoid this by exercising meticulous
record keeping and, if in doubt, consulting legal and financial
advisers.
Nicknames, advisory holding companies, and missing addresses
slow signing and can misname the legal owner in documents; use full
legal names and contact details.
“Roughly right” percentages hide errors in the total
issued shares; reconcile the denominator regularly against
allotments and transfers.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.