A capitalisation table, commonly known as a cap table, sets out the ownership structure of a company. It lists all shareholders, the classes and number of shares they hold, and their percentage of ownership. It may also include options, warrants, convertible instruments, and any special rights attached to different share classes.

More than just a record of who owns what, a cap table is a key legal and commercial document. It is essential for companies planning to raise investment, offer employee incentives, or prepare for an exit. It is important to note that there is no statutory template or prescribed format, each cap table is unique to the company’s circumstances and needs. 

Why is a capitalisation table important?

For growing companies, a well-maintained cap table provides clarity and helps ensure compliance at every stage of development.

Transparency
A clear cap table ensures all parties, including founders, investors and advisers, have a shared understanding of the company’s ownership structure. This can help avoid misunderstandings and reduce the risk of disputes.

Investment readiness
Cap tables are typically reviewed during investor due diligence. A clean and accurate version demonstrates that the company’s affairs are in order, and can help reduce delays during a transaction.

Effective decision making
A cap table allows directors and shareholders to model different scenarios, such as issuing new shares or creating an employee option pool, and to understand the effect on dilution and control.

How do capitalisation tables change over time?

A typical cap table starts simply, with just the founders and their shareholdings. As the business grows, the cap table may expand to include:

  • New share issues for investment
  • Multiple share classes with different rights
  • Employee option schemes
  • Convertible loan notes or other equity linked instruments
  • Transfers of shares between shareholders

Each change should be properly documented, approved where necessary, and reflected accurately in the cap table. A good discipline is to version control them in order to help understand progression over time, saving versions with clear dates allows companies to trace their ownership history and understand how the structure has evolved. 

Common issues and risks with cap tables

Discrepancies between the cap table and the company’s legal documents are not uncommon. Problems with cap tables are frequently identified during legal due diligence and can result in delays, renegotiations, or even the loss of investor confidence.

Cap table legal compliance

The information in the cap table should be consistent with the company’s statutory registers and legal agreements. If discrepancies arise, it is the statutory registers and Companies House filings that carry legal authority, but ideally, all records, including the cap table, should align.

Legal support for cap table management

Cap tables must be kept accurate and legally compliant to support the company’s growth and protect its stakeholders. 

Companies planning to raise investment, offer equity incentives, or undertake structural changes should ensure their cap table is in good order. Where required, legal advice can help resolve issues and ensure that future changes are properly documented and compliant. Our legal services include:

  • Reviewing existing cap tables, reconciling with Companies House filings, corporate actions and corporate registers and correcting inconsistencies
  • Ensuring that the cap table gives an accurate representation of share issues, share transfers and restructurings
  • Incorporating cap tables, or relevant parts, into shareholder agreements and investment terms
  • Using a cap table as an accurate summary when advising on and implementing option schemes such as EMI
  • Supporting companies through investor due diligence and exit planning

For more information on cap tables or assistance with corporate matters, please contact the team at Farringford Legal.