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\n within Corporate\/Commercial Law topic(s)
\n with Inhouse Counsel
\n in United Kingdom
<\/p>\n
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A capitalisation table, or cap table, is one of the key sources
\nof truth for your company’s ownership structure. At its
\nsimplest, it should tell you who owns how many shares, what class
\nthose shares are, and what percentage in the company those shares
\nrepresent.<\/p>\n
Properly maintaining your cap table will give you and your
\ninvestors a clear picture of your ownership and equity structure,
\nmaking fundraising easier and helping to prevent any unwelcome
\nsurprises. Your investors will expect your cap table to be accurate
\nand consistent with the company’s register of members and
\nCompanies House filings, so it is an important thing to get right
\nand keep on top of.<\/p>\n
What goes into a cap table?<\/p>\n
\nAt a minimum, a cap table should include the following:
\n
\nlist every shareholder (ideally by their full legal name)
\n
\nthe number of shares that each shareholder holds
\n
\nthe class attaching to the shares (for example, ordinary or
\npreferred)
\n
\nthe percentage of shares held by each shareholder \u2013 this
\nshould be displayed on both an undiluted basis (i.e., counting only
\nthose shares which are actually issued) and a fully diluted basis
\n(i.e., including any option pool or convertibles)
<\/p>\n
If you’re planning a raise, an incoming investor would also
\nexpect that your cap table displays the “post-money”
\nposition, being the cap table as it would look assuming investment
\ncloses, reflecting any new investors and changes to your option
\nplan. This is important so you and your incoming investors have a
\nclear picture of how the equity and control structures in your
\ncompany will look following the investment.<\/p>\n
Building your cap table<\/p>\n
Start with the founders: record each founder’s name and
\nshareholding so that the numbers match the incorporation or any
\npost\u2011incorporation allotments.<\/p>\n
As you start raising money, add your investors to the cap table.
\nIf you have them, record your option pool, making sure to
\ndistinguish between those options which have been allocated to
\nemployees and those which haven’t.<\/p>\n
It’s also a good idea to note any convertibles that the
\ncompany might have issued, whether those are SAFEs, advance
\nsubscription agreements or convertible loans. Ideally, for each
\ninstrument, you would set out the amount advanced under that
\ninstrument, any valuation cap or discount that might apply upon
\nconversion, and the longstop (or maturity) date for conversion of
\nthe instrument (if any).<\/p>\n
Keep it aligned with your legal records<\/p>\n
Founders can often forget that, alongside your cap table, every
\ncompany needs to maintain a register of members. Unlike a cap
\ntable, a register of members is a legally required document that
\nmust contain certain information about your company’s
\nshareholders.<\/p>\n
If your cap table and your register of members don’t line
\nup, an incoming investor’s due diligence may flag it up as an
\nissue to rectify before they invest, and founders can risk losing
\nprecious time fixing historic issues.<\/p>\n
After each share issue, share transfer, change to your option
\npool or any other change to your share capital structure, be sure
\nto update the cap table straight away and keep one “current
\nversion” clearly labelled.<\/p>\n
Common snags and how to dodge them<\/p>\n
\nFailing to update the cap table regularly and misallocating
\nequity confuses investors. Avoid this by exercising meticulous
\nrecord keeping and, if in doubt, consulting legal and financial
\nadvisers.
\n
\nNicknames, advisory holding companies, and missing addresses
\nslow signing and can misname the legal owner in documents; use full
\nlegal names and contact details.
\n
\n“Roughly right” percentages hide errors in the total
\nissued shares; reconcile the denominator regularly against
\nallotments and transfers.
<\/p>\n
The content of this article is intended to provide a general
\nguide to the subject matter. Specialist advice should be sought
\nabout your specific circumstances.<\/p>\n","protected":false},"excerpt":{"rendered":"Lewis Silkin LLP\u2019s articles from Lewis Silkin are most popular:
within Corporate\/Commercial Law topic(s)
with Inhouse Counsel
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