The cap table is the company's record of who owns what. It should show issued shares, granted options, the unallocated option pool and investments that have not yet converted, such as SAFEs and notes, with each category kept separate. Every line should point to the document that created it, so that a founder or investor can trace each holding back to its source.
Many startups I see keep their cap table in a spreadsheet that someone updated from memory after the last round, which works until an investor's due diligence begins. A cap table is only reliable when it is built from the legal records, starting at incorporation and following every issue and transfer since then, and once that record exists, the company can model a new round in a separate tab without changing the record of what people actually own.
Rebuild issued ownership from the records
The rebuild should start with the subscribers at incorporation and then follow every later allotment through its approvals and payment, checking each one against the return of allotment filed at CAC. A share transfer needs a signed share transfer form with stamp duty paid before the register is updated, and if anyone still owes money on their shares, the cap table should show that as well.
The register of members should be reconciled with the share certificates and CAC filings, and both should then be checked against the transaction documents. Where these records disagree, the company should find out what actually happened and correct the position through the proper process, because changing the spreadsheet does not correct the underlying legal record.
Each share class should be shown separately, with a link to the terms that apply to it. Two people holding the same number of shares can have very different rights if one holds preferred shares carrying a liquidation preference and consent rights.
Record outstanding investments and options
Every SAFE and note should be listed with the amount invested and the terms that affect conversion, such as the cap and discount, and any interest in the case of notes. Side letters that give extra rights should be linked to the relevant instrument, since these are contractual commitments until they convert or come to an end.
For options, granted options should be shown separately from the unallocated pool, and both should be kept apart from informal promises that have not yet been approved. A cancelled option only returns to the pool if the plan allows it and the necessary steps have been taken, and offer letters should be checked against the option register so that no award is counted twice.
A fully diluted model is useful for planning, as long as its assumptions are written down. I explain why the conversion result depends on the definitions and on the other instruments outstanding in how pre‑money and post‑money SAFEs affect ownership, but a model is only a scenario and should be kept separate from the record of issued ownership.
Founder shares and their restrictions
Where founder shares are subject to vesting, the cap table should record the full holding and show the unvested portion as restricted. The founder remains the registered holder until the company completes the buyback or transfer, so showing both figures allows the cap table to explain the present ownership and what would happen if a founder left.
After a founder leaves, the cap table should record the completed transfer or buyback with the buyer and the price, and flag anything still pending. The register should only be changed once the transaction is legally complete, and I cover the employment and board steps that run alongside the share transfer in working through a founder's departure.
If a shareholder dies, the company needs evidence of who is entitled to act, usually a grant of probate or letters of administration, before it registers a transmission of the shares, and until then the position should be recorded as pending.
Interests held through other people
A nominee holds shares on behalf of someone else. The company should keep the nominee or trust document and know who gives instructions and who receives the economic benefit, because that information also feeds into the company's disclosures of persons with significant control under CAMA, which CAC is now enforcing actively.
Each registered holder should be asked whether they hold shares for anyone else, and the answer should be reviewed whenever ownership changes. The cap table and the company's records should then show both the registered holder and the person behind them.
Personal information in the working file should also be protected. Investors need enough detail to check ownership, but identity documents and home addresses should only be shared with the people who need them, and I explain how to stage that disclosure in getting your documents ready for an investor.
Restructurings are transactions too
A share split or consolidation needs approvals and CAC filings before the new numbers are used. The change should be applied consistently to every class and to every instrument with adjustment terms, including option exercise prices, and the treatment of fractions should be explained.
A company buyback must meet the approval and solvency requirements set by CAMA, and the cap table should record whether the shares were cancelled or held as treasury shares, together with what that means for voting.
When a new parent company is placed above the operating company, the share exchange and the treatment of options and SAFEs should be traced. The old cap table and the exchange documents should be kept, so that a later reviewer can see how the current shareholders acquired their shares.
One current record with a history
One person should be responsible for updating the cap table, and a dated version should be saved after every completed change. Each line should be linked to its supporting documents, and the cap table should show the date up to which it is accurate, with proposed grants and funding scenarios kept in separate, clearly labelled tabs.
Before a round, the cap table should be reconciled with the legal documents and with the finance team's record of the money received, and I use that position to model new investment in how a funding round changes your ownership. If anything remains unresolved, it should be disclosed with the supporting evidence and the proposed fix, so that everyone involved knows which figures are settled.
This article is general information and not legal advice. For guidance on your specific circumstances, speak with us directly.