What Shareholders Need to Know About Cap Tables: Guide
The basics of how a company’s equity is divided are outlined in the company’s cap table. In simple terms, a cap table or otherwise known as a capitalization table, is a list that summarizes what percentage of the company each shareholder owns. It is crucial for shareholders to understand the role and purpose of the cap table. This article covers some of the importance of the cap table along with a few points on how to maintain and structure the cap table.

Cap table for shareholders
The cap table is the most useful document for shareholders. Shareholders benefit from understanding the cap table because it gives them a clear picture of how their company is structured and how they can exercise their shareholder rights.
What is a cap table?
A cap table is a summary of how the company is organized in terms of ownership, equity, dilution, and value of equity. While a cap table is created after every round of funding, it is an extremely useful tool for founders as well as investors.
This is because the cap table gives founders and investors a clear view of their company’s structure and allows them to access their share of the company’s equity. Therefore, it is crucial that the cap table is reviewed regularly and accurately.
Why is a cap table important?
The capitalization table is perhaps one of the most important documents for both founders and investors. It is essential that the cap table is clearly laid out and easily accessible. Here are a few advantages of a cap table:
- Useful for founders – The cap table is one of the most important documents for founders because it can help them understand their company’s structure, see how they own equity, track the funding history, and see what effect future rounds of funding will have on the company. With this information, founders can make more informed decisions that will impact the future of their company.
- A better understanding of equity – It is important for founders to understand the role of equity in their company with the cap table. The capitalization table is useful for this because it outlines who owns what percent of the company and gives them a better idea of how ownership is divided. A good level of understanding of equity can help a company run more smoothly and effectively.
- Help in equity distribution – Having a good grasp of equity is important for founders to make informed decisions on distributing their shares, especially when it comes to future funding rounds. It is vital to carefully review the cap table right after each round of funding in order to properly distribute shares.
- Show future dilution – A capitalization table is useful for founders because it can give them a good idea of how much dilution will occur after each funding round. This can help founders make more informed decisions about handling future rounds of funding and retaining their ownership of the company.
- Help retain talent and stock options – A good understanding of equity will help founders retain their talent and avoid losing company control while still retaining ownership. It is important to track and understand each investor in order to retain the talent. Thus, it is important for founders to periodically review the cap table.
- Lookup on inverter’s shareholding – The cap table is useful when it comes to checking on the current shareholding of an investor. It is important to ensure that current shareholding information is accurate, especially when the number of shares increases over time. Investors who want to keep a close eye on shareholding can use this information to do so.
- Help in investment – A capitalization table is valuable for potential investors to assess the company and its structure. By reviewing a cap table, investors can make informed decisions about raising capital to invest in the company. This can help them get a good idea of shareholding in the company as well as find a good fit with the company’s investment round.
- Help in term sheet negotiations – A cap table is an important tool for both founders and investors to negotiate the terms of their investment. With the help of a cap table, investors can review the information and come up with a fair share of ownership of the company. This can make negotiations simpler and more effective.
- To Maintain tax regulations – The cap table is valuable for the company to make sure they are meeting tax regulations. It is important to track and report all transactions made with regard to financing and taxes, as well as review the cap table regularly to avoid tax complications.
- To Track shareholders – The cap table will help founders keep track of all shareholders to ensure the equity is properly dealt with and maintained, especially when it comes to future funding rounds.
- To sell the company – When a company is ready to be sold, it is important to properly structure the capitalization table and make sure it is clean and transparent. This will make it easier for potential buyers to understand the company and how it is structured.
Therefore, it is important that the cap table is organized and maintained to facilitate transparency and ease of access to information. The cap table should show investors and founders what they own, how they own it, and how they will be treated if they have any future dealings with the company.
Why is a cap table important for shareholders?
For shareholders, the capitalization table is useful because it gives them the information they need in order to make informed decisions about their stake in the company. It is essential for shareholders to review and understand their stake in the company as well as how ownership will be distributed.
Moreover, it may help a shareholder identify an exit strategy for their investment. Thus, it is important for shareholders to examine their stake regularly and make sure it is correctly listed in the shareholder’s cap table.
A cap table (capitalization table) is important for shareholders for several key reasons:
- Ownership transparency – A cap table clearly shows who owns what percentage of the company, allowing shareholders to understand their exact ownership stake and how it compares to others.
- Decision-making power – The ownership percentages in a cap table often indicate the level of decision-making power each shareholder has in the company.
- Valuation tracking – Shareholders can use the cap table to track the value of their investment over time as the company grows and undergoes funding rounds.
- Dilution awareness – When new shares are issued or new investors come on board, the cap table helps existing shareholders understand how their ownership percentage may be diluted.
- Exit planning – In the event of a company sale or liquidation, the cap table is crucial for determining how proceeds would be distributed among shareholders.
- Fundraising tool – For startups seeking investment, a well-maintained cap table can add confidence in potential investors by providing a clear picture of the company’s ownership structure and financial health.
- Employee equity management – For companies offering stock options, the cap table helps track available options and assists in making informed decisions about equity compensation for employees.
- Financial modeling – The cap table serves as a foundation for creating pro forma ownership scenarios and waterfall models, which are useful for shareholders to understand potential future outcomes.
- Legal protection – In disputes or legal issues, an accurate cap table helps establish clear ownership rights and this can be used as evidence in legal proceedings.
- Informed decision-making – Shareholders can use the cap table to make buying and selling decisions about shares, exercising options, or participating in new funding rounds.
By providing a clear and up-to-date picture of a company’s ownership structure, a cap table serves as a crucial tool for shareholders to understand their position, rights, and potential returns in the company.
Importance of Transparency and Shareholder Access to The Cap Table
Transparency and shareholder access to the cap table is increasingly important for startups and private companies, offering several key benefits:
- Informed decision-making – Transparent cap tables allow investors and other stakeholders to make more informed decisions about investments, valuations, and future funding rounds. This clarity can lead to faster deal closures and more efficient fundraising.
- Improved investor relations – Providing investors with clear visibility into the ownership structure builds trust and confidence. Investors feel more assured when they have accurate information to perform their own calculations and assessments.
- Employee engagement – For companies offering equity compensation, providing employees access to cap table information helps them understand the value of their equity stakes. This transparency can boost motivation and retention.
- Efficient due diligence – During mergers, acquisitions, or new investment rounds, a transparent cap table streamlines the due diligence process.
- Compliance and legal assurance – Maintaining an open and accurate cap table helps compliance with legal and regulatory requirements, reducing the risk of disputes or compliance issues.
- Clarity on ownership structure – A transparent cap table provides all stakeholders with a clear understanding of the company’s ownership hierarchy, which is crucial for strategic decision-making.
While full cap table transparency may not be appropriate or feasible for all companies, increasing transparency can generally lead to better relationships with investors and employees, more efficient operations, and improved decision-making.
Does a cap table include all the shareholder equity details?
Yes, the cap table does include all the details of equity held by all shareholders. The information on shareholder equity includes the name of the shareholder, the number of shares owned, the number of stock options owned, the number of outstanding shares, and the number of shares not issued.
The cap table is based on the company’s equity to the shareholders, which means it is essential to include all the shareholder equity details. To better understand, the cap table structure is explained in further sections of this blog.
Can a shareholder access their company cap table?
Yes, a shareholder can access the company’s cap table at any time. A Cap table is created to help shareholders understand their position and maintain it for future investment. In addition, there is no legal requirement that states the cap table must be kept confidential.
Therefore, even though anyone can access a cap table, it is a best practice that shareholders should refer to their company’s legal counsel before sharing their cap table with others. Moving on to “how to maintain a cap table?”
Role of Cap Table Informing Shareholder’s Voting Rights and Influence in Decision Making
A cap table provides crucial information to shareholders about their voting rights and potential influence on company decisions based on their ownership stake.
Here are the key ways a cap table informs shareholders about voting rights and influence on company decisions:
- Share class details – Cap tables typically include information on the class and type of shares each shareholder holds. Different share classes may have different voting rights, so this helps shareholders understand their specific voting privileges.
- Ownership percentage – The cap table clearly shows each shareholder’s ownership percentage in the company. This directly correlates to their voting power and influence on major decisions.
- Voting rights – A well-maintained cap table explicitly records whether a shareholder has voting rights. This is critical for determining who has a say in key commercial decisions.
- Dilution details – Cap tables track dilution over time as new shares are issued. This allows shareholders to see how their ownership percentage and corresponding voting power may change with new funding rounds or equity issuances.
- Preferred stock privileges – For investors holding preferred stock, the cap table outlines any special voting rights or preferences they may have. This could include enhanced voting power on certain matters.
- Stock option information – Cap tables often include details on stock options granted to employees or other stakeholders. This helps existing shareholders understand potential future changes in voting dynamics as these options vest and are exercised.
- Convertible securities – Information on convertible notes, warrants, or other securities that could potentially convert to voting shares is typically included in a comprehensive cap table. This gives shareholders insight into possible future shifts in voting power.
How to maintain a cap table?
A good cap table is maintained through the strict policies and procedures set by the company. It will be a good idea to regularly review these policies and procedures to make sure that they are up to date. A cap table structure should be maintained in a neutral format, and all changes made to the cap table should be done through authorized personnel. The cap table should be protected against unauthorized access and updates. This will help to maintain the accuracy and validity of the cap table.
Structure of a cap table
A cap table is structured in a spreadsheet to simplify the tracking and management of shareholder’s equity. Each column and row represents a specific piece of information about the company. When setting up a cap table, it is vital to record all of the relevant information. The first row includes the total number of shares of the company, while the following row lists authorized shares, outstanding shares, unissued shares, and shares reserved for the stock option plan.
Thereafter, a separate table is created for the shareholders, which consists of the information of each shareholder like name, the number of shares owned, the number of stock options owned, the number of outstanding shares, and the number of shares not issued.
How should a company manage a cap table?
The cap table should be managed by authorized personnel. Managing the cap table is a challenging task, and the company should set policies and procedures in place to define and manage the cap table. These policies should be incorporated into the company’s by-laws and maintained as part of the company’s operating procedures.
Moreover, a company should record all changes made to the cap table through proper channels. This will help ensure that authorized personnel are informed of any changes to the company’s capital structure. Here are a few tips on how to maintain a cap table:
- Understand the basic elements and format of a cap table – In order to manage a cap table, it is necessary for company executives to understand the basic elements and format of a cap table. With a proper understanding of the cap table, executives are better equipped to make effective decisions. This makes it easier for them to communicate with investors, employees, and shareholders.
- Take advantage of making decisions as an executive – As an executive, you should have the ability to make decisions that support the business. Your responsibility is to make sure operations are running smoothly and effectively. Cap table is key in this respect as it will allow you to make decisions for future funding rounds, such as high-priority strategic acquisitions and mergers.
- Manage the cap table with effective tools or software – Calculation of cap tables can be challenging. Therefore, a good way to maintain it is through the use of effective tools or software. There are many online tools that have been developed specifically for the management of cap tables. These tools will help you to track information efficiently and keep a close watch on your company’s equity structure.
- Calculate and give ownership of the cap table – A proper accounting system should be established to update the cap table regularly. In order to properly maintain the cap table, it is essential that accurate information is compiled in an organized way. Therefore, the accounting system must be set up in a way that will enable you to calculate and give ownership of the cap table.
- Share valuable information with investors – Being transparent with investors will help them understand the value of their stake in your company. A good way to share valuable information is through the cap table. You need to make sure that the cap table complies with all regulatory requirements.
- Share with employees – In order to effectively communicate with employees, it is important for them to have access to the cap table. This will enable them to understand their company equity and provide a better understanding of their options. The cap table also allows you to send regular updates on the company’s progress and development.
Therefore, the cap table is a best practice that should be implemented whenever shares are issued. It is important to understand the basic elements of a cap table and how to manage it. This will make sure that your company upholds the standards set by the law, maintains its value, and promotes transparency.
Red Flags that Shareholders Should Look for in a Cap Table
By being aware of red flags shareholders can better assess the health of a company’s cap table and identify potential issues that may affect future growth, fundraising, and overall company success.
Here are key red flags that shareholders should look for in a cap table:
- Excessive number of small investors – A cap table with too many small investors, requiring multiple page breaks, is a red flag. This can complicate decision-making and future negotiations.
- Uneven equity distribution among founders and team members – Investors prefer to see a balanced ownership structure with the founding team retaining significant equity. If founders or key team members have too little ownership, it can raise concerns about long-term incentives and retention.
- Large equity stakes held by ex-founders or departed team members – Having significant “dead equity” owned by people no longer involved in the business can be problematic, as it reduces available equity for current contributors and future investors.
- Overcrowded cap table – Having too many entities (15-20 or more) listed in the cap table can be seen as messy and potentially problematic for future decision-making and fundraising.
- Lack of employee option pool – A healthy cap table should include an adequate option pool (typically 15-30%) for future hires and employee incentives.
- Excessive equity given to non-operational partners – Large equity stakes held by professors, universities, or research institutes in deep tech startups can be concerning. Investors typically prefer to see university equity capped between 10-15%.
- Unique terms or preferences for individual investors – Having investors with special or overly complicated terms can introduce complexity and risk during future funding rounds or exit scenarios.
- Founder dilution – If founders have been diluted too much in early rounds, it may signal poor judgment or unfavorable early deals.
- Inconsistencies or errors – Mathematical errors or inconsistencies in the cap table can indicate potential issues with financial management or attention to detail.
- Misalignment with company stage – If the ownership structure doesn’t align with the company’s current stage (e.g., too much dilution too early), it may indicate poor planning or unfavorable early deals.
A good cap table keeps investors always informed about changes in the cap table and the company’s financial status to build trust and avoid surprises during due diligence.
How does Eqvista help with shareholder management or cap table management?
Eqvista provides comprehensive cap table management and shareholder management capabilities through its software platform. Here are the key ways Eqvista helps with these tasks:

- Digital cap table creation and maintenance – Eqvista allows companies to create and manage their cap tables digitally, eliminating the need for error-prone spreadsheets. The software automatically updates the cap table as equity transactions occur, ensuring accuracy.
- Share issuance and tracking – Companies can easily issue and track different types of shares, options, warrants, and convertible notes through Eqvista’s platform. This includes creating various share classes and managing option pools.
- Electronic Stock Certificate – Eqvista offers electronic certificate as a part of cap table management platform, that helps companies to reduce paperwork and improve efficieny
- Shareholder communication – Eqvista facilitates direct communication between companies and their shareholders, allowing for easy sharing of information and updates.
- Scenario modeling – The software enables companies to model different funding scenarios and equity distributions, helping with strategic decision-making.
- Compliance management – Eqvista assists with equity-related compliance issues, including 83(b) election, Form 3921 and ASC 718 stock expensing. It also helps generate necessary tax reports and forms.
- Access control – Companies can flexibly share limited or full access to cap table information with shareholders, lawyers, investors, and other stakeholders as needed.
- Real-time data and reporting – Eqvista provides real-time updates to cap table data and offers easy access to various reports and financial models.
- Equity distribution simplification – Eqvista streamlines the complex process of equity distribution, making it easier for companies to manage their ownership structure.
- Scalability – The software can accommodate companies from pre-seed startups to pre-IPO stage, allowing for growth without changing platforms.
Imagine a company is completing its Series-A funding round. The company has the following types of securities and transactions:
- Common Stock
- SAFE notes (some converted to Seed and Series-A stock)
- Seed Preferred Stock (some transferred to other shareholders)
- Stock Options with different vesting schedules (some exercised to common stock, some expired)
- Series-A Preferred Stock
Currently, they keep all cap table records in Excel and paper documents, including:
- One Excel file for all the common stocks and seed preferred stock originally issued by the company
- Eight SAFE agreements, with a written record that three of the eight have been converted to seed stock
- Ten seed preferred stock agreements
- Two share transfer agreements
- Twelve employee option agreements, with two options expired and three exercised to common stock
- Fifteen Series-A preferred stock purchase agreements
As the company scales, managing the cap table this way becomes increasingly difficult. Company owners, investors, and stakeholders need an up-to-date and accurate cap table in one place. Eqvista can help meet these needs by providing:
- The most up-to-date cap table
- Records of capital raised and shares issued in each funding round

- An account for each stakeholder to view their grants

- Each stakeholder’s diluted ownership after the Series-A round

- Options’ vesting schedules and vested amounts for exercise

- All historical transactions

- Financial modeling and compliance tools

By providing these features, Eqvista simplifies cap table management, reduces errors, ensures compliance, and gives transparency to all stakeholders involved in a company’s equity structure. This comprehensive approach helps companies save time, make informed decisions, and maintain accurate records of their ownership structure.
Eqvista’s cap table and features
Eqvista’s sophisticated cap table software is easy to use and caters to all types of companies, from seed stage to pre-IPO. Managing your company’s equity can be done on a single platform and you can give cap table access to relevant shareholders. What’s unique about Eqvista is it also supports many features such as issuing shares, updating cap tables in real time, digitally signing share certificates, round modeling and financial modeling.

Why choose Eqvista as a trustable shareholder management software?
A good cap table should be set up in the company to systematically track shareholders’ equity and ensure effective management. It should be well structured, supported by effective tools or software, and maintained as part of the company’s by-laws. The importance of the cap table is to provide useful insights and advice for the company’s all: the investors, employees, and shareholders. With Eqvista’s shareholder management software, companies can adopt a simple and easy-to-use system to manage their equity. Eqvista is one of the leading and trustable solutions for your organization. Learn more about our cap table services by contacting us today!