What is a Capitalization Table? A Comprehensive Legal Overview
Definition & Meaning
A capitalization table, commonly referred to as a cap table, is a detailed document that outlines the equity ownership and securities issued by a company. It provides a clear view of the company's capital structure, listing all types of securities, such as common stock, preferred shares, options, and warrants. The cap table also defines the ownership percentages and the total investment amounts for each type of security, helping stakeholders understand their financial interests in the firm.
Legal Use & context
Capitalization tables are primarily used in corporate law and finance. They play a crucial role in various legal contexts, including:
- Company formation and structuring
- Investment rounds and fundraising
- Mergers and acquisitions
- Compliance with securities regulations
Users can manage their cap tables using legal templates available through platforms like US Legal Forms, which are drafted by experienced attorneys.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A startup issues 1,000 shares of common stock to its founders and raises $500,000 by issuing 500 preferred shares to investors. The cap table will show the total number of shares, the ownership distribution, and the amount raised.
Example 2: A company planning to go public updates its cap table to reflect the current ownership structure, including options and warrants, to prepare for the IPO process. (hypothetical example)