Reading time: 5 minutes

As a startup, you will have a number of important documents and other files in your records. The law requires that companies have some of these documents, while other documents are used for various transactions or other commercial reasons. Two important documents that you will interact with are the startup’s capitalisation table (cap table) and the members’ register. Although many founders believe these are the same, they are different and serve different purposes. This article will explain why a startup cap table and members’ register are important to your startup and how you should be using them.

What Is a Cap Table?

A cap table shows your company’s share structure, including options and other securities which may convert into shares in the company. The startup cap table sets out each shareholder’s percentage ownership in the company. It often shows the percentage ownership both before and after the conversion of any convertible securities such as options. It also shows the number and class of shares each shareholder owns. Usually, a cap table is prepared in an excel spreadsheet or a similar program. This allows you to easily update it as you issue new shares, convert securities and transfer shares.

Importantly, the law does not require you to have a cap table. However, startups commonly use it, and potential investors will almost always ask to see it. A cap table can assist investors to easily understand what the company’s current share structure looks like, and what it will look like following the capital raise. In particular, they will be looking at their percentage shareholding following the capital raise.

What Should a Cap Table Include?

As there are no legal requirements, different startups may include different information in their cap tables. However, there are market standard details that you would expect to see in a cap table.

The cap table will usually show your company’s current share structure. It will usually also include, among others, the following details:

  • pre-money valuation (the value of your startup before the investment round);
  • post-money valuation (the value of your startup after the investment round) after taking into consideration your startup’s Employee Stock Option Plan (ESOP) (if relevant);
  • total investment amount; and
  • investment price per share.

A cap table allows the startup to project investment and understand the impact of a potential investment on its share structure using several different forecasts.

What Is a Members’ Register?

Similar to a cap table, your startup’s members’ register also shows the details of your startup’s shareholders and the shares they own. However, unlike a cap table, a members’ register will only include information about your company’s actual shares (and not any convertible securities).

For example, options are recorded in a separate register known as the optionholders register.

The law requires your company to have a members’ register. You must also keep the register up-to-date.

What Should a Members’ Register Include?

The law requires that the members’ register must contain specific information for each shareholder. For example, the members’ register must show:

  • each shareholder’s name and address;
  • the number and class of shares they own; and
  • the date when they became a shareholder in the company.

When you close an investment round, you must update the members’ register to reflect the issuance of new shares to each investor. Similarly, when a share transfer occurs in your company, you will need to add the details of the share transfer and the details of the new transferee to the members’ register.

Other information that the members’ register must show and update to keep current include:

  • the date on which every allotment of shares takes place. This is when a company earmarks new shares to predetermined shareholders;
  • the number of shares in each allotment;
  • the number of shares held by each member;
  • the class of shares held by each member;
  • the share numbers or share certificate numbers (if any) of the shares;
  • the amount paid on the shares;
  • whether the shares are fully paid;
  • the amount unpaid on the shares (if any); and
  • whether the shares are held beneficially (e.g. for the sole benefit of the shareholder) or non-beneficially (e.g. on trust for others).

The information contained in a members’ register is similar to the information which must be notified to ASIC when a transaction occurs.

Key Takeaways

While there are many similarities between a startup’s cap table and members’ register, they are quite different. One of the key differences is that a members’ register is required and regulated by law, while a cap table is not legally required. Both a cap table and members’ register will show your startup’s share structure. A cap table assists with future forecasting and modelling. Contrast this to a members’ register which contains information about your company’s current shareholders and their shareholdings. Your startup will need to keep a members’ register up to date. A startup’s cap table and members’ register gives your startup and its investors a comprehensive understanding of the company’s capital structure. If you have any questions about your startup’s cap table or members’ register, get in touch with LegalVision’s capital raising lawyers on 1300 544 755 or fill out the form on this page.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Maya_Lash
Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards