Who Should Own the Cap Table?

Let’s take a look at the cap table—a vital piece of your business that tracks who owns how much of your company. It’s essential for investors, legal compliance, internal strategy, and so much more. But one common question arises in many companies:

Who Should Own and Manage the Cap Table?

While it’s a team effort across departments like legal, HR, and finance, someone needs to take the lead. (Keep in mind that the following advice mostly applies to early to mid-stage private companies. Many companies hire an in-house stock plan administrator when they are preparing to go public, or as soon as the equity workload becomes a full-time job.)

A Collaborative Effort

The cap table involves input from multiple teams because of its importance across different areas of the business. Here are a few of the areas of the business that rely on the cap table:

• Legal: Legal teams typically handle the paperwork—stock agreements, compliance, and other legal documentation. They’re often involved in key changes like new equity issuances or stock transfers.
• HR: The HR team handles offer letters that include equity awards. The team also has all employees’ information, which is important to include when issuing equity, to ensure it goes to the correct employee.
• Finance: Finance relies on the cap table for financial forecasting, valuation updates, and investor reporting. They’re particularly concerned with how equity impacts the company’s financial health.

With these departments involved, it’s easy to see how confusion or errors could occur without clear ownership. That’s why having a dedicated owner matters.

Why Ownership Matters

Having a single point of accountability for the cap table is key to ensuring accuracy and trust. Here are the main benefits:

• Reduced Errors: Mistakes in equity allocations or ownership data can cause serious problems, from compliance risks to strained investor relationships. A dedicated owner can help prevent these errors.
• Efficient Processes: If every update requires coordination between multiple teams, delays and miscommunication are inevitable. With one owner, processes move faster and more smoothly.
• Increased Trust: A well-managed cap table builds confidence among investors, employees, and executives. They can trust the data is up-to-date and accurate.

Some Options for Managing the Cap Table

Companies typically have three main options for managing their cap table: in-house ownership, legal counsel, or outsourcing to external experts. Let’s take a closer look at each option.

1. In-House Management

This approach involves assigning cap table responsibilities to someone within the company—often someone in legal, HR, or finance.

Pros:

• Full control over the cap table and immediate access to updates.
• Lower costs if the cap table isn’t too complex.

Cons:

• Requires in-depth expertise in equity and software tools.
• Can become overwhelming as the company grows and equity structures become more complex.

2. Legal Counsel

Many companies rely on their external legal team to handle cap table updates, particularly during important events like fundraising rounds or acquisitions.

Pros:

• Strong legal expertise ensures compliance.
• Familiarity with key contracts and equity agreements.

Cons:

• Can be expensive, as legal fees add up.
• Less focus on day-to-day cap table management.

3. External Experts or Teams

Outsourcing cap table management to specialists can provide expert oversight without requiring internal resources.

Pros:

• Access to experienced professionals with deep knowledge of equity management.
• Potentially scalable support that can grow with the company.
• Frees up internal teams to focus on other priorities.

Cons:

• Requires strong communication to avoid delays.
• Costs vary depending on service level and provider.

 What Makes a Great Cap Table Owner?

Whether managed internally or externally, the cap table owner should have a few key qualities:

Equity Expertise: They need to understand stock options, RSUs, other equity awards, tax implications, compliance requirements, regulations, and so much more.

Proficiency with Software: The cap table owner should know how to use cap table management platforms as most companies will utilize a software solution to manage their cap table.

Attention to Detail: Given the complexity of equity management, the owner must ensure every entry is correct and up to date.

Strong Communication Skills: The cap table owner collaborates with multiple departments, so clear communication is crucial.

The Collaborative Approach with Centralized Execution

Even with one person or team owning the cap table, collaboration remains critical. Here’s how the process typically works:

Input Gathering:

• Legal provides new grants, board consents, and other legal documentation that’s necessary.
• HR provides employee information.
• Finance requests data for reporting and forecasting.

Centralized Updates:

• The cap table owner consolidates this input and updates the company’s cap table within their software platform.

Review and Validation:

• Regular reviews/audits with legal, HR, and finance ensure the cap table is always accurate and up to date.

Conclusion: Choosing What Works Best for Your Company

Ultimately, managing the cap table is too important to leave up to chance. It’s a critical tool for maintaining employee engagement, ensuring compliance, and building investor trust. Whether you choose to manage it in-house, through legal counsel, or with external experts, the goal is to find a solution that works best for your company’s size, complexity, and resources. One of these options will likely work for a time, and then you may need to switch to a different approach.

By assigning ownership to one qualified person or an expert team, you’ll create a solid foundation for long-term growth and success.