Harper James advises UK start-ups, scale-ups and established companies on maintaining accurate ownership records under the laws of England and Wales. A capitalisation table, or cap table, records who owns a company, the number and class of shares held, and how ownership changes after fundraising, employee share schemes or transfers.
A reliable cap table normally includes issued shares, share classes, nominal values, voting rights and the percentage ownership of each shareholder. It should also record share options, warrants, advance subscription agreements and other rights that may result in future shares. For an employee share plan, such as an EMI option scheme, the table should distinguish granted, exercised, lapsed and unallocated options.
The cap table should agree with the company’s statutory registers, articles of association, shareholder agreements and filings at Companies House. Companies House records are important, but they do not replace the company’s own statutory register of members. Differences between these records create problems during due diligence, particularly when an investor or buyer checks the company’s ownership before completion.
Every transaction should be recorded through a defined process. Before issuing shares, the board checks available authority, pre-emption rights, the relevant share class and any investor consent requirements. The company then prepares the subscription or investment documents, updates the register of members and share certificates, and files the required Companies House forms. A share transfer follows a different process and normally requires a stock transfer form, appropriate approvals and cancellation or reissue of share certificates.
Founders and finance teams should model the effect of each proposed transaction before signing. The model should show the pre-money and post-money ownership, dilution of existing shareholders, investor rights and the fully diluted position after options and other convertible instruments are included. This gives the board and shareholders a consistent basis for approving the transaction.
A cap table should have one controlled version, a clear record of supporting documents and restricted editing access. Companies should reconcile it with the statutory registers after every allotment, transfer, option exercise or conversion. An annual review should check dormant options, expired rights, incorrect shareholder addresses, missing certificates, unresolved pre-emption notices and inconsistencies between the cap table and Companies House filings.
Before a funding round, acquisition or employee share plan, the company should complete a formal ownership audit. The review should identify missing approvals, historic informal promises of equity, unrecorded transfers and tax or reporting issues. Correcting these matters before due diligence is generally more straightforward than reconstructing the company’s ownership history during a live transaction.