What is a Cap Table and Why Does Your Company Need One?
For founders and investors, a clear and well-maintained Cap Table is an essential tool for managing ownership, tracking investments, and planning for future fundraising rounds.
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For founders and investors, a clear and well-maintained Capitalisation Table (Cap Table) is an essential tool for managing ownership, tracking investments, and planning for future fundraising rounds. This document is more than just a spreadsheet; it’s the backbone of your company’s equity structure, offering transparency and clarity for all stakeholders.

Here, we delve into what a Cap Table is, why it’s crucial for your company, and how to manage it effectively to keep your business on track and attractive to potential investors.

What is a Cap Table?

A Cap Table is a detailed record that outlines the ownership structure of a company. It lists all shareholders, including founders, employees, and investors, along with the number of shares they hold, share options, and any equity allocated through convertible agreements.

A Cap Table typically includes:

  1. Shareholders: A breakdown of all individuals and entities holding equity in the company.
  2. Shareholding Percentages: The percentage ownership of each shareholder, displayed on both an undiluted and fully diluted basis.
    • Undiluted Basis: Reflects current ownership without considering potential dilution from convertible instruments or options.
    • Fully Diluted Basis: Accounts for the conversion of convertible instruments (e.g., convertible notes) and exercise of share options, giving a clear picture of future ownership stakes.
  3. Classes of Shares: Details on the types of shares issued, such as ordinary shares, preference shares, or growth shares.
  4. Historical Data: A timeline of changes in the company’s capitalisation, including dates of share issuances, price per share, and amounts paid by each shareholder.

Why Does Your Company Need a Cap Table?

A well-maintained Cap Table serves several key purposes:

1. Transparency for Fundraising

When seeking investment, potential investors will want to understand your company’s ownership structure. A clear Cap Table shows who owns equity, the distribution of voting rights, and what their stake in the company will look like post-investment. This transparency builds trust and simplifies the due diligence process.

2. Tracking Equity and Dilution

As your company grows and undergoes multiple fundraising rounds, the ownership percentages of earlier investors and founders will dilute. A Cap Table makes it easy to track these changes and understand the impact of new investments on existing shareholders.

3. Managing Share Options

For companies with employee share option pools, a Cap Table is essential for tracking unissued options and calculating the dilution effect once those options are exercised. This ensures the company can incentivise employees while maintaining a clear understanding of equity distribution.

4. Historical Recordkeeping

Your Cap Table acts as a comprehensive record of your company’s equity history, enabling you to analyse trends, evaluate the impact of past decisions, and plan for the future with precision.

Key Elements of a Cap Table

Your Cap Table should provide detailed insights into the following:

  1. Ownership Details: Legal names of shareholders and their corresponding shareholding.
  2. Equity Classes: Information on the type of shares issued, such as ordinary shares or preference shares, and the rights attached to each class.
  3. Investment History: A record of each investment round, including dates, price per share, and amounts invested.
  4. Option Pools: Allocation of share options, including unissued options, which will impact future dilution.
  5. Dilution Tracking: Clear calculations of ownership percentages on an undiluted and fully diluted basis, giving shareholders and investors a clear view of their current and potential stakes.

Updating and Managing Your Cap Table

Your Cap Table is a living document that must be updated regularly:

  • Before and After Fundraising Rounds: Reflect changes in equity ownership after new shares are issued or convertible instruments are exercised.
  • After Option Allocations: Ensure any new share options granted to employees are reflected in the Cap Table.
  • Post-Investment Activity: Record shareholder changes following secondary sales or transfers of shares.

Failing to maintain an accurate Cap Table can lead to confusion, legal disputes, and diminished trust from investors.

Why Avery Law?

At Avery Law, we specialise in helping companies create, manage, and optimise their Cap Tables. With years of experience guiding startups, scaleups, and investors through the intricacies of ownership and fundraising, we ensure that your Cap Table becomes a powerful tool for growth.

And yes, our co-founder David Turney is affectionately known as "The Cap Lawyer"—not just for his legendary Avery Law caps, but for his expertise in simplifying, modelling and managing the complexities of equity structures and Cap Tables.

Ready to Get Started?

Whether you’re setting up your first Cap Table or looking to refine it for your next fundraising round, our team at Avery Law is here to help.

Contact us today to ensure your equity structure is clear, compliant, and ready to support your business ambitions.