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Start-ups: what is a cap table and how do you use it?

Whatever stage you’re at in the development of your business, keeping an up-to-date capitalisation table or ‘cap table’ will give you a clear view of your company’s ownership structure, from the time it’s formed until the time you exit.

Not only is the cap table a useful decision-making tool, but it can also help you raise further finance and support the development of your business, as it demonstrates to investors that you’re ambitious and ready to grow. In this guide, we look at cap tables in more detail and show you how to record vital data.

What's a cap table?

A cap table is a document that records the ownership of a business, showing the degree of control each shareholder has, the class of share they own, and the number of shares. It’s also used to show the effect that any new issue of shares will have on the existing owners — known as ‘dilution’.

Cap tables are often used by start-ups to demonstrate the impact that fundraising will have on share ownership, the exercise of any outstanding options and under employee incentive schemes.

What should a cap table include?

A cap table should include the following information:

  • the current shareholders and their holdings
  • the number of shares that will be issued to meet options
  • the number of shares that will be issued to meet convertible loans
  • any planned new issues of shares

It will also show, over time, the consequences of any share transfers and cancellations, as well as the effects of dilution once any proposed transaction such as the exercise of options or issues of shares to new investors has taken place

Here’s a simple sample cap table:

Emma and Kate each own 50 ordinary shares in Cap Tables Limited. Cap Tables Ltd has issued 100 ordinary shares in total.  

 Current ownershipFully diluted ownership
Emma50% (ordinary)N/A
Kate50% (ordinary)N/A

As neither of them has a controlling interest, company decision-making must be unanimous.

Emma and Kate decide that the company will set up an employee incentive scheme. Under the scheme, Emma and Kate will each be granted options to acquire 50 shares, and two new employees will be granted options to acquire 20 shares each. In addition, the company has issued a convertible loan note that can be converted by the note holder into 40 ordinary shares. The cap table will now look like this:

 Current ownershipFully diluted ownership
Emma50% (ordinary)37.5%
Kate50% (ordinary)37.5%
Employee A0%7.14%
Employee B0%7.14%
Note Holder0%14.28%

Emma and Kate’s ownership position has now changed. Neither Emma nor Kate can now block an ordinary resolution of the company acting on their own. Furthermore, either Emma or Kate, acting together with the Note Holder, can pass an ordinary resolution.

Why do I need a cap table?

Keeping an up-to-date cap table is an essential part of good corporate housekeeping. In addition, cap tables are necessary when you want to issue equity to staff or investors. It enables stakeholders to see the consequence of proposed new share issues. In addition, keeping your cap table up to date is a good way to demonstrate to business angelsventure capital firms and private equity institutions that you’re serious about attracting investment. 

Most equity investors will expect to review your cap table as a matter of course before they invest. If you can’t produce one, or it’s poorly maintained, it could raise a red flag about your management abilities.

Cap tables can also be used to calculate a potential return on equity based on the company’s value. You’ll need to detail the amounts paid and due from investors, detail any preferences and any projected equity funding. You can then use your cap table to estimate the amount payable to shareholders if you do an IPO.

Cap table management for small businesses

There’s no single way to create a cap table, from a hard copy to a desktop version using software such as Excel.  There are also proprietary apps that will create your cap table automatically.

It’s also up to you to choose the layout; you can order by type of investor (founders, SEIS or EIS investors, staff for example) or you can order by the percentage of share ownership. You’ll need to include:

  • the shareholder’s name
  • the number and class of shares they own
  • any options by number and class
  • any convertible notes and number of shares convertible
  • any planned share or option issues
  • current ownership percentage
  • fully diluted ownership percentage
  • the value of that person’s fully diluted holding based on the company’s value

Regardless of the format you choose, there must be enough flexibility to make quick changes, and the cap table should be useable, so not overly detailed.

Venture capital firms and other equity investors may ask for preference shares when they invest. These give preferential rights, for example to dividends and on a company liquidation. They may come with voting rights. These special rights should be noted in the cap table.

Let us create and manage your cap table from £187.50

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Your Cap table checklist

Record appropriate information

First off, decide what you need to include in your cap table. Consult your register of members, note any outstanding share options and proposed funding rounds, as well as any outstanding convertible loan notes.

Research the market and pick the most appropriate software for your particular business needs. Take a demo and learn how to use your new software, then record all of the information you have collected.

Provide access

If you decide to use a cloud-based solution, you can share a link with all those who need to see it, including your co-founders, management team and advisors.

When you update the document, the changes will be available online for everyone to see.

Review and alert people to updates

The information contained in your cap table will impact key decisions about funding and employee incentive schemes, so make sure you update your stakeholders with any changes. Update it every time you go through a funding round, acquisition, make a senior hire and when shares are bought, sold or cancelled. Your cap table is only as strong as the data within it, so make sure it’s robust.

Stay on top of compliance

Compliance varies depending on the location of your business and its shareholders. Learn which authorities require information and the various relevant tax codes that apply. Better yet, hire a team of corporate solicitors who can do the job for you.  

Consider how much information to share

Sharing financial information can help to empower your team, but in some cases it’s possible to be too transparent. Work out what details will help your employees understand the context of your organisation, without giving away sensitive data on shareholders.

Be prepared to delegate

If your business is growing, you’ll probably want to turn the task of keeping your cap table updated to your professional advisor. Prepare for this event by keeping your records tidy, accurate and clear.

If you’d like to know more about cap tables, or would like further information about starting a company, contact our team of expert corporate lawyers. Get in touch on 0800 689 1700, email us at, or fill out the short form below with your enquiry.

About our expert

Adam Kudryl

Adam Kudryl

Chief Legal Officer & Head of Corporate
Having qualified as a solicitor in 2003, Adam has over 20 years' experience in advising businesses on their growth and exit strategies. Adam joined Harper James as a Partner in 2018 and became Head of Corporate in 2022. As of April 2024, Adam’s new role is Chief Legal Officer & Head of Corporate. In this role, he is responsible for the legal services aspects of Harper James and for defining the firm’s strategic vision and objectives to achieve our long-term goals, together with our CEO, Toby Harper, and the other senior leaders.

What next?

Get expert legal advice from our team of corporate specialists on using a cap table to encourage investors to take notice of your business. Get in touch with us on 0800 689 1700, email us at or fill out the short form below with your enquiry.

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