What is a Cap Table?

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What is a cap table?

A cap table, short for capitalisation table, is a crucial document that records all the ownership stakes in your company.

It shows every shareholder, their number of shares, the type of shares they hold, and their percentage ownership. Think of it as a detailed map of who owns what in your business.

The cap table tracks ordinary shares, preference shares, options, warrants, and any other securities your company has issued.

It's not just a static document - it changes every time you issue new shares, grant options to employees, or bring in new investors.

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Why do founders need cap tables?

Cap tables help founders make informed decisions about their business.

When you're considering raising investment or granting employee options, you need to understand how these actions will affect everyone's ownership percentage. This is called dilution.

Investors will always ask to see your cap table before investing.

They want to understand the current ownership structure and ensure there are no nasty surprises.

A well-maintained cap table demonstrates professionalism and builds trust with potential investors.

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Where will I see this?

You'll first encounter cap tables when incorporating your company where you will create an initial version showing the founding shareholders and their ownership percentages. Later, when approaching investors or setting up an employee share option scheme, you'll need to present and update this document regularly.

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How do cap tables work in practice?

Your cap table starts simple when you incorporate - perhaps just you and your co-founders holding ordinary shares.

As your company grows, it becomes more complex. You might issue preference shares to investors, grant share options to employees, or create different classes of shares with varying rights.

The table must be accurate and up-to-date.

Many founders use spreadsheets initially, but specialised cap table software becomes essential as complexity increases. Open Forest will help ensure the cap table reflects your company's actual legal structure.

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When should you update your cap table?

Update your cap table immediately after any transaction that affects ownership.

This includes new investment rounds, employee option grants, share transfers, or when options are exercised.

Regular updates prevent errors and ensure compliance with company law requirements.

You'll also need to file relevant information with the appropriate company registry whenever significant changes occur.