What is a capitalisation table?
Very simply, it's a summary of who owns the company.
More technically, it's a record of all equity shares, share options, convertible shares and warrants.
What are the common pitfalls of equity management?
Poor record keeping and incomplete records, especially in Excel when there are multiple versions of the same information
No idea how many share options have been issued
Don't know how many shares have been issued
No record of what notifications with have been with HMRC for share options
Information are all in different locations
Missed annual notifications - didn't know they had to be done annually
Equity in the balance sheet doesn't reconcile to Companies House
Not having a Register of Members, a statutory obligation from Companies House
Poor implementation of systems, when moving from Excel to a software
Poor processes and handovers between HR and the Finance team and the Legal team
What are the general benefits of using software?
Issues shares instantly: generates resolutions and links to companies house
Generates share certificates
Scenario modelling and building
Guided set up and support
Legal register automatically updated and submitted
Details of software available
Along with maintaining a cap table there are three legal registers which must be kept up to date and accurate.
Register of Members
with details of:
Shareholder/member start date
Shareholder/member leave date
Number of shares held (ordinary, a-shares, non-voting, etc)
Register of Directors
with details of:
Directors name (and any former names)
Directors country of resident
Register of People with Significant Control (PSC)
Hold more than 25% of a share in a company, or;
Hold more than 25% of the voting rights in a company.
Corporate governance is the system of rules, practices, and processes by which a firm is directed and controlled.
This becomes more important as companies grow and there are more stakeholders involved who require transparency over decisions being made. In equity management it primarily relates to the below events:
Changing company articles
Variation of share class rights
Appoint/Terminate a director
With the key questions being:
Is a director/shareholder resolution required?
What pass rate of directors/shareholders are required?
Are there any directors/shareholders who must sign for it to pass?
Approved vs Unapproved Share Options
The main difference between approved and unapproved share option schemes is that any approved options exercised will not incur any tax for the employee at the point of exercise, as any tax due is deferred until the shares are sold.
However, approved share options can only be granted to employees that are eligible from businesses that are eligible. Unapproved options can be granted to basically anyone.
One of the most popular approved share option schemes is the Enterprise Management Incentives (EMI) scheme but there are other options, details of which can be found