Cap table

What it means

A cap table shows who owns what part of the company: the members or shareholders, their percentages, and the instruments that will only later turn into a stake. It answers an investor’s first question, how much of the company the money buys.

What binds is the state recorded in the commercial register and the constitutional documents, and the cap table is a management layer on top. It adds what the register cannot see: option pools, convertible loans and side agreements between owners.

A cap table is kept in two views: by the business shares actually issued, and fully diluted, as if every option and loan had already converted. Voting and the right to profit follow the first view today, but negotiations with an investor turn on the second, and a founder holding a third may hold noticeably less after conversion.

How it works in practice

When venture capital comes in, the table is built twice, before the investment and after it, with the employee option pool included. The gap between the two is the dilution that is actually negotiated.

In an s. r. o. every change of ownership runs through a transfer of the business share, certified signatures and a register entry. The cap table therefore has to reconcile with the register, or diligence finds the story and the papers disagreeing.

In a simple joint-stock company the cap table is easier to maintain, because shares transfer without changing the commercial register entry and different classes with different rights can be issued. Even there, the table given to an investor has to agree with the share records kept by the central depository.

What to watch out for

A verbal promise of a stake to the first employee never reaches the table, and years later nobody can evidence it. At a sale or a financing round such claims surface all at once, cut the price and in the worst case stop the deal.

The table does not capture the tax and accounting consequences of ownership changes. A sale or a free transfer of a stake has consequences for both seller and acquirer, and a price between related parties can draw the tax office’s attention, so each change is filed with the contract and a record of how the price was set.