Commonly referred to as a ‘cap table’, a capitalisation table is a detailed record of who owns what for a company. A cap table documents the formal share ownership- that is, who the shareholders or members of the company are and how many shares they own. Ideally a cap table would also detail other forms of contingent investment or ownership such as options, SAFE notes and convertible notes. In this article, we help you to understand the needs of a cap table for companies in Australia and New Zealand.
One of the key reasons a company needs to create and maintain a cap table is to show the percentage of share ownership on a fully diluted and non-diluted basis. A fully diluted cap table indicates all the possible contingent share ownership, including future rights to buy the company's shares such as options or convertible notes. Having these captured on a cap table ensures that a company is meeting its obligations and the required shares are accounted for and issued accordingly. Aside from ensuring that a company accurately represents all current and future ownership stakes, having a cap table also helps a company to:
be aware of the number and type of different stakeholders, and manage any company control considerations
determine the dilution of current shareholders, by modelling various future investment rounds
calculate and determine a company’s valuation based on various investment scenarios.
There is no fixed format for cap tables, but they are usually made up of a list of investor names or groups including founders, investors, or employees on one side of the table, and details around what they own on the other side such as:
the share class
the number or quantity of shares
the issue date
the share price
Based on these details, a cap table may also show the percentage of equity each investor has in the company.
Here's what an example cap table could look like:
Having an accurate cap table is essential for startups and growth companies as they are likely to have evolving capital structures, and a large appetite for investment to fund early stages. An up-to-date cap table can be a particularly useful tool for these companies to test future capital raise scenarios and keep track of key investors and shareholdings.
In Australia and New Zealand, a comprehensive Cap Table typically includes the following information:
the number and types of shares every shareholder owns
all shares issued by the company and the shareholder details
details and dates of any repurchase or redemption of shares for each shareholder
details and dates of any transfer of shares by each shareholder
an alphabetical list of the shareholders’ names with their residential addresses or registered office (if they are a company)
any restrictions or limitations on the transfer of shares and where to find these details.
member name and addresses
the dates on which entries on the register are made
the number of shares in each entry
the total number of shares held by each member
whether the member is holding the shares for its own benefit (beneficially held) or for the benefit of others
the class or classes of shares
the share numbers (if any), or share certificate numbers (if any)
whether the shares are fully paid (including the amount paid or unpaid on the shares).
the dollar value which investors have paid
pre-money and post-money valuations
the total amount invested in a company
share options (when a company has an Employee Share Ownership Plan- ESOP)
hybrid equity instruments such as convertible notes or SAFE notes
The information held in a company’s share (or member) register and in a cap table can be similar, however there are key differences. For companies in many countries, maintaining a share register is a legal obligation, whereas keeping a cap table is not. Both your share register and cap table will highlight the formal share ownership in a company, however only your cap table will hold information on future share ownership, a record of all financial investment, and details on different capital rounds. As such, a cap table can be a powerful tool to forecast or predict what your company’s capital structure will look like in the future.
Historically, a company’s cap table has been maintained in a document list or a spreadsheet by the company Founder, CEO, or CFO. Many companies will also have their service providers such as vCFOs, lawyers or accountants manage a separate document or spreadsheet.
One risk associated with this approach is that the cap table and the company’s share register will often not reconcile, and small mistakes in a spreadsheet will compound into big issues for the company down the track when overlooked. Potential investors could identify mistakes in the cap table and be wary that the company information is not being managed accurately.
An increasing number of companies are now turning to online software such as Orchestra to create and manage their cap tables. There are many benefits to moving from spreadsheets and using cap table management software including:
DISCLAIMER: This article is for informational purposes only, and contains general information only. Orchestra is not, by means of this information, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This information is not intended as a recommendation, offer or solicitation for the purchase or sale of any options or shares.