Cap Table (Capitalization Table)

A cap table lists every person who owns, or has a right to acquire, equity in a corporation and calculates the percentage each of them holds. A basic version has one row per holder and a column for each class of shares, such as common shares and preferred shares, followed by options, warrants and convertible instruments. A better version also records the issue date, the price paid, the certificate number and any vesting terms for each holding, so every number can be traced to a document.

No Ontario or federal statute requires a cap table. Founders keep one because almost every equity decision runs through it: the opening split at incorporation, the size of an option pool, the price per share in a financing, and who receives what on a sale. Investors ask for it early in due diligence, and their lawyers test it against the corporation's records before any closing.

Issued basis. Counts only shares that have actually been issued and are outstanding. This view decides who votes today and who receives dividends.

Fully diluted basis. Counts issued shares plus every share the corporation could be required to issue under existing commitments: outstanding options and warrants, the unallocated balance of the option pool, SAFEs and convertible notes on an as-converted basis, and convertible preferred shares as if converted into common. It answers the question investors care about: what will each holder own once every promise has been honoured?

There is no statutory definition of fully diluted. Each term sheet and financing document defines it, and the definition moves money. Whether the unallocated pool, a pool increase and unconverted SAFEs are counted in the pre-money share count decides who absorbs that dilution: the existing holders or the new investor. Our entry on pre-money vs. post-money valuation shows how the price per share is derived from that count.

SAFEs and convertible notes. A SAFE or convertible note is not a share. Its holder has no vote and is not a shareholder until the instrument converts, usually in the next priced round. Because the conversion price depends on a valuation cap, a discount or both, the number of shares each instrument will become is an estimate until that round closes. Model each instrument on its own line, with its amount, cap, discount and whether it is a pre-money or post-money SAFE, rather than as one blended total. Our guide to how SAFEs and convertible notes work in Canada walks through the conversion arithmetic.

The option pool. The pool is the number of shares the board has set aside for grants under an employee stock option plan. Split it into granted options, listed by holder with the exercise price and vesting schedule; exercised options, which are now issued shares; and the unallocated balance. A pool increase an investor requests in a priced round should appear as its own line, so everyone can see whose percentage it reduces.

Unvested founder shares. Founder shares subject to reverse vesting are issued and outstanding from the day they are issued, so they count on both bases. The cap table should still show how many remain subject to repurchase.

Section 141 of Ontario's Business Corporations Act requires every corporation to keep a securities register: for each class or series of securities, the people who are, or within the last six years were, registered shareholders, with their holdings and the date and particulars of every issue, plus a separate register of transfers. Our entry on share certificates explains what the register contains and why it, not a certificate, is the official record. For cap table purposes, note that the register also covers registered holders of debt obligations and of warrants, a term the Act defines to include any document evidencing conversion privileges, options or rights to acquire securities; warrants exercisable within one year of issue are left out. Federal corporations keep an equivalent register under section 50 of the Canada Business Corporations Act.

The register must in turn rest on valid issuances. Under section 23, a share cannot be issued until it is fully paid in money, property or past service worth at least what the corporation would have received in money, and a promissory note from the subscriber does not count as property. Equity that was promised but never issued and paid for belongs on neither record as shares.

The register of individuals with significant control, covering individuals who hold or control 25% or more of the votes or value or who have control in fact, is a third and separate record; our guide to the ISC register explains it.

Most problems surface in an investor's due diligence, when they are most expensive to fix:

• Equity promised by email or handshake but never issued, or issued without a directors' resolution or without payment.
• Options granted without board approval or a signed grant agreement, or exercise prices with no support for the fair market value used.
• SAFEs entered as a single total, hiding different caps and discounts.
• Transfers to holding companies or family trusts made in practice but never entered in the register of transfers.
• New shares issued without first offering them to holders who have pre-emptive rights, which apply under section 26 of the OBCA only where the articles or a unanimous shareholder agreement provide for them.

Reconcile the cap table to the minute book after every issuance, grant, exercise, transfer and conversion, not only before a round. Lamba Law's free equity splitter helps co-founders agree the opening split before the first shares are issued, and our cap table and stock option practice rebuilds tables that no longer reconcile.

Daniela Okafor and Raj Venkataraman run Routewise Inc., a Mississauga logistics software company. Daniela holds 5,000,000 common shares and Raj holds 3,000,000. The board has reserved a 1,000,000-share option pool, and the company has raised $500,000 on a post-money SAFE with a $10 million valuation cap. Their spreadsheet showed only the issued column, so they believed Daniela owned 62.5%.

When a seed investor asks for a fully diluted cap table, their lawyer models the SAFE at its cap, about 5% of the company before the new money, or roughly 473,684 shares:

Percentages are rounded. The review also finds that the minute book has no directors' resolution behind Raj's shares, although the register lists them, and that an adviser, Mei Lin, was promised 1% of the company by email in 2025. The directors and shareholders pass resolutions ratifying Raj's issuance and confirming the $300 he paid, and the board grants Mei 94,737 options from the pool, about 1% fully diluted, under a signed option agreement. The corrected table is attached to the seed investor's subscription agreement, and the round closes on schedule.