How to Run a Cap Table Review

Most Indian founders do not have a cap table. They have a spreadsheet that looks like one. That distinction becomes expensive when you raise your seed round, issue ESOPs, close a co-founder exit, or face diligence. A proper cap table review in India means reconciling your company’s legal records, shareholder agreements, funding instruments, options, and promised equity into one ownership picture. Do it before investors ask. Once diligence starts, every unexplained share is a negotiation problem.

What is a cap table review in India?

A cap table review is a line-by-line check of who owns, can own, or may receive equity in your company. It covers issued shares, paid-up capital, transfers, founder holdings, angel and venture capital investments, convertible notes, optionally convertible instruments, ESOPs, sweat equity, advisor grants, and any rights that can change ownership later.

You are not merely checking percentages. You are checking whether each entry is legally supported and whether the spreadsheet agrees with:

• the company’s register of members;
• share certificates and allotment records;
• board and shareholder resolutions;
• filed forms with the Ministry of Corporate Affairs;
• share subscription and shareholders’ agreements;
• convertible instruments and side letters;
• ESOP and sweat equity records; and
• banking and tax records for money received.

The spreadsheet is only the summary. The legal documents are the evidence.

Investor rule: if your cap table cannot be reconciled to your statutory records in one working session, your next round will take longer and cost more.

Why cap table reviews matter before an Indian seed round

At incorporation, your ownership may be simple. Two founders hold 10,000 shares each. Then reality arrives.

You promise 2% to an early employee. An advisor receives 0.5%. An angel invests through a convertible note. A co-founder leaves but keeps all their shares. You create an ESOP pool before a priced round. A founder transfers shares to a family member without recording the transfer properly. Someone receives a side letter promising additional shares if a milestone is met.

None of these events looks fatal in isolation. Together, they create a cap table that an investor cannot price confidently.

Investors care because ownership affects:

• how much dilution founders have already taken;
• whether the founding team still has enough incentive to continue;
• who controls board and shareholder decisions;
• how much room remains for hiring;
• how convertible instruments will dilute the round;
• whether a previous investor has a veto, pro-rata right, or liquidation preference;
• whether an employee or former founder can challenge the company’s ownership; and
• whether the proposed transaction complies with Indian company law and foreign exchange rules.

A messy cap table is not an administrative nuisance. It is a signal about how you run the company.

How we run a cap table review

Do not start by changing formulas. Start by collecting evidence. The review should follow a fixed order.

1. Freeze the current spreadsheet.
2. Collect every ownership and financing document.
3. Rebuild the historical transaction ledger.
4. Reconcile the ledger with statutory records.
5. Model fully diluted ownership.
6. Test the next financing under several scenarios.
7. Record unresolved issues and assign owners.

Keep the original spreadsheet untouched. Save a copy called something like Cap Table Review, 10 November 2026. You need an audit trail. If you overwrite the old version, you lose the ability to explain how a number changed.

1. Build the document pack

Ask your company secretary, finance lead, lawyer, and founders for the full record. Do not accept “we have most of it”. Missing documents are precisely where ownership disputes hide.

Your pack should include:

• certificate of incorporation and current constitutional documents;
• memorandum and articles of association;
• register of members and register of transfers;
• share certificates and distinctive share numbers;
• allotment returns filed with the MCA, including PAS-3 where applicable;
• annual returns and paid-up capital records;
• board and shareholder resolutions approving allotments and transfers;
• founder, investor, employee, advisor, and consultant agreements;
• share subscription agreements and shareholders’ agreements;
• convertible note, debenture, CCD, CCPS, SAFE-like, or other financing documents;
• ESOP scheme, grants, exercise records, cancellations, and lapses;
• sweat equity approvals and valuation reports;
• foreign investment filings and relevant RBI reporting, where applicable; and
• bank statements showing subscription money received.

For a private limited company, the company secretary should confirm what the statutory registers show. For a foreign investor, check whether the instrument, pricing, reporting, and allotment comply with applicable foreign exchange rules. Do not assume that a document signed by everyone is automatically valid.

2. Rebuild the transaction ledger

Create a separate sheet listing every event in chronological order. This is more useful than staring at the final ownership percentages.

Date	Event	Holder or instrument	Shares or principal	Price or conversion terms	Supporting document	Statutory filing
Incorporation	Founder allotment	Founder A	50,000 shares	₹10 per share	Incorporation records	Confirm MCA records
Seed round	Issue of preference shares	Angel syndicate	As per allotment	Price per share and rights	SSA and board resolution	PAS-3 and related filings
ESOP grant	Option grant	Employee 1	1,000 options	Exercise price ₹X	Grant letter	Scheme register

Use one row per event. Do not combine five allotments into “investor shares”. You need to know which shares came from which round and which rights attach to them.

3. Reconcile the current share count

Calculate the current issued share capital from the bottom up:

Opening issued shares + new allotments − cancellations − valid transfers out + valid transfers in = current issued shares.

Then compare that number with:

• the register of members;
• the latest annual return;
• the latest allotment filing;
• share certificates; and
• the cap table.

These numbers should match. If they do not, stop and classify the mismatch. A simple spreadsheet error is different from an allotment that was never filed or a transfer that was never registered.

Do not “fix” the statutory record by editing the spreadsheet. Do not “fix” the spreadsheet by pretending the legal record does not exist. Ask your company secretary and counsel to determine the correct remediation.

Separate issued shares from promised equity

This is where many founders mislead themselves without intending to.

Issued shares are already owned. Options are rights to receive shares later. A verbal promise is not an option grant. A signed advisor agreement may create a contractual obligation even if no shares have been issued. A convertible note may not appear in the current shareholder list but can materially change the next round.

Use at least three views:

View	What it includes	Why it matters
Issued and outstanding	Shares currently issued and held	Legal ownership and current voting position
Fully diluted	Issued shares plus granted and reserved options, warrants, and conversion assumptions	Realistic ownership after expected equity issuance
Financing scenario	Fully diluted holdings plus proposed new money and terms	What founders and existing investors own after the round

Never quote “founders own 80%” without saying which view you mean. An investor will ask whether that 80% is before or after the ESOP pool, convertible conversion, and the new round.

ESOPs: granted, vested, exercised, and available are different

Track each category separately:

• Pool reserved: the maximum number of options approved under the scheme.
• Granted: options promised to specific employees.
• Vested: options the employee has earned under the vesting schedule.
• Exercised: options converted into shares.
• Lapsed or cancelled: options no longer available to the employee.
• Unallocated: the remaining pool available for future grants.

A common Indian startup mistake is to show the entire ESOP pool as “employee ownership” even when most of it remains unallocated. That may be acceptable for a financing model if clearly labelled. It is not acceptable as a description of current legal ownership.

Also check the scheme’s treatment of employees who leave. Does vesting stop on the last working day? How long do they have to exercise? What happens to vested options on termination for cause? The answer affects the pool available for hiring and the company’s future dilution.

Advisor and consultant equity

Advisor equity often creates disproportionate trouble. A founder gives 1% to a well-known person for introductions. The advisor makes three introductions, disappears, and still claims the full grant.

Review:

• the exact percentage or number of shares;
• whether the grant is on a fully diluted basis;
• vesting and milestone conditions;
• termination rights;
• confidentiality and intellectual property assignment;
• tax treatment; and
• whether the person is an employee, consultant, director, or independent advisor.

Unvested advisor equity should not sit permanently on the cap table as if it were earned. If the agreement is vague, resolve it before a fundraise. Investors dislike “dead equity”: shares held by people who no longer contribute but retain a meaningful stake.

Review founder ownership and dead equity

Founders should not automatically own equal shares. They should own shares that reflect contribution, commitment, role, timing, and risk. But once you have issued shares, changing the split is not a casual correction.

Ask:

• Did each founder sign an IP assignment?
• Are founder shares subject to vesting or a reverse-vesting arrangement?
• What happens if a founder leaves in month six?
• Is there a good-leaver and bad-leaver mechanism?
• Does the shareholders’ agreement match the employment and founder agreements?
• Has a founder transferred shares without board approval or proper registration?
• Does a former founder still hold enough shares to block a reserved matter?

A 50:50 split with no deadlock mechanism is not fairness. It is a future boardroom hostage situation. Add a founder who has stopped working and refuses to sell, and your financing can stall for months.

Do not try to solve this by secretly cancelling someone’s shares. Indian company law, contract terms, tax consequences, and shareholder rights matter. Use counsel. The correct solution may involve a transfer, buyback, negotiated settlement, vesting enforcement, or simply accepting the ownership and designing governance around it.

Read the financing documents, not just the ownership percentages

Two investors can each own 10% and have very different economic and governance rights.

For every investor, record:

• class of security;
• number of shares or principal invested;
• issue price and valuation;
• liquidation preference;
• conversion ratio and conversion triggers;
• anti-dilution protection;
• pro-rata or pre-emptive rights;
• information rights;
• reserved matters and veto rights;
• board appointment or observer rights;
• transfer restrictions and tag or drag rights; and
• any side letter or most-favoured-nation clause.

Preference shares with a 1x non-participating liquidation preference are not the same as ordinary shares. A participating preference, multiple preference, or seniority stack can change exit economics even when the cap table percentages look clean.

Build a waterfall model for a few exit values. At ₹10 crore, ₹50 crore, and ₹200 crore, who receives what? This is not only a Series A exercise. Seed investors may have rights that become relevant when you sell the company or conduct a secondary transaction.

Convertible notes and SAFE-like instruments

Indian founders often leave convertibles outside the cap table because “they have not converted yet”. That is a serious error.

For every convertible instrument, capture:

• principal and accrued interest, if any;
• valuation cap;
• discount;
• qualified financing threshold;
• maturity date;
• conversion or repayment rights;
• most-favoured-nation rights;
• seniority;
• currency and foreign investor status; and
• what happens if the next round is below the cap or does not happen.

Model conversion under at least three cases: the next round is below the cap, at the cap, and above the cap. Include the option pool treatment. A convertible that appears to represent 5% in your mental model can become 12% after interest, discount, cap, and pool expansion.

Use the same definitions as the financing documents. “Fully diluted capitalization” is not a universal phrase. One agreement may include the unallocated ESOP pool. Another may exclude it. Your model must follow the contract.

Model the next round before you negotiate it

Do not negotiate valuation first. Build the ownership model first.

Suppose your company has 1,000,000 fully diluted shares before the round. You raise ₹4 crore at a ₹16 crore pre-money valuation.

The post-money valuation is ₹20 crore. The new investor owns:

₹4 crore ÷ ₹20 crore = 20% post-money.

Existing holders collectively own 80%. But this simple calculation can change if:

• the investor requires the ESOP pool to increase before the investment;
• convertibles convert at a discount or valuation cap;
• the stated valuation is based on a different share count;
• the investor receives warrants or additional rights;
• the round includes a secondary sale; or
• the company issues shares to settle old promises.

Run three tables:

1. Current ownership: issued and fully diluted.
2. Proposed round: new shares, price, pool, and conversion.
3. Downside case: lower valuation, delayed round, or bridge financing.

Then calculate founder ownership, investor ownership, employee pool, and voting control after each case. If you do not understand the dilution formula, read this seed-round cap table dilution walkthrough before signing a term sheet.

The ESOP pool shuffle

Investors often ask for an option pool increase before the round. That is normal. The point of negotiation is who bears the dilution.

If the pool is increased before the investment, existing shareholders usually absorb that dilution. If it is created after the investment, the new investor shares some of it. The economic result can differ materially even when the post-money ownership looks similar.

Ask the investor to show the exact pre-money and post-money cap table. Do not accept “we are giving you 20%” until you know whether the pool top-up is inside or outside that 20%.

Red flags an investor will notice immediately

• Founder percentages do not add up: the spreadsheet has rounding errors or hidden rows.
• Unexplained “others”: nobody can identify the holders or documents.
• Large advisor grants: especially where vesting is absent.
• Dead equity: former founders or employees retain meaningful ownership.
• Verbal promises: founders have committed equity without recording terms.
• Convertible instruments missing: the cap table shows only issued shares.
• Mismatch with MCA records: the legal capital differs from the spreadsheet.
• Unfiled allotments: money came in but the corporate paperwork is incomplete.
• Foreign investment gaps: pricing, reporting, or instrument issues remain open.
• No IP assignment: the person receiving equity may not have assigned work product.
• Founder split with no vesting: one departing founder can retain a large block.
• Option grants without board approval: the employee may have a promise, not a valid grant.
• Rights hidden in side letters: the visible cap table understates investor obligations.

One red flag may be fixable. A pattern tells an investor that the company has weak controls. That affects trust, diligence time, and sometimes valuation.

Which cap table tool should you use?

At the pre-seed stage, a well-built spreadsheet can work. It should have locked formula cells, a change log, separate tabs for issued shares, options, convertibles, transactions, and scenarios, and a clear “as of” date.

Move to dedicated software when you have several financing instruments, a large ESOP programme, multiple share classes, frequent grants, or institutional investors asking for live access. The tool does not fix bad data. It only makes bad data look more official.

Stage	Practical system	Minimum discipline
Incorporation to first angel round	Controlled spreadsheet plus company secretary records	Record every allotment and transfer immediately
Seed round with ESOPs and convertibles	Spreadsheet with scenario models or cap table software	Track fully diluted ownership and conversion terms
Series A preparation	Dedicated software plus legal and CS review	Reconcile all historic transactions before diligence
Multiple classes and foreign investors	Software, counsel, tax advisor, and company secretary	Review governance, FEMA, tax, and exit rights together

Do not outsource understanding. Your lawyer can confirm legal validity. Your company secretary can manage filings. Your finance team can model dilution. You still need to know what you own and what you are giving away.

A cap table review you can complete this week

Block two hours with your co-founders and finance or legal support. Produce these five outputs:

1. Ownership sheet: every holder, security class, shares, and percentage.
2. Transaction ledger: every allotment, transfer, grant, exercise, cancellation, and conversion.
3. Instrument register: every note, debenture, preference share, warrant, and side letter.
4. ESOP register: pool, grants, vesting, exercises, lapses, and balance.
5. Issues list: mismatch, missing document, responsible person, and deadline.

Colour-code the issues:

• red: ownership or legal uncertainty;
• amber: missing document or filing;
• blue: modelling assumption; and
• green: reconciled and supported.

Then send the red items to your counsel and company secretary. Do not wait for the next investor meeting. A clean-up can take weeks if a former founder, foreign investor, or old advisor must sign documents.

After the review, set a simple rule: no equity promise, grant, transfer, or financing without updating the transaction ledger and obtaining the required approval. Review the cap table monthly during a fundraise and quarterly otherwise.

Bottom line

A cap table is not a fundraising slide. It is the ownership ledger of your company. The number that matters is not the percentage you quote in a pitch. It is the percentage that survives legal review, conversion, ESOP expansion, liquidation preferences, and the next financing.

Run the review before you need the money. Clean ownership gives you negotiating power. Messy ownership gives the investor a reason to delay, discount, or demand that you absorb the clean-up through dilution.

If you want a founder-level review of the ownership and financing choices ahead, Malpani Ventures works with early Indian startups on both the numbers and the decisions behind them.

FAQs

What is a cap table review in India?

It is a reconciliation of your company’s ownership records, financing documents, ESOPs, convertibles, transfers, and statutory filings. The goal is to confirm who owns what today and how future instruments will change ownership.

Who should review a startup cap table?

The founders should understand it. A company secretary should check corporate records and filings. A startup lawyer should review rights and agreements. A finance person should model dilution, conversions, and financing scenarios.

How often should an Indian startup update its cap table?

Update it after every allotment, transfer, option grant, exercise, cancellation, conversion, or financing amendment. During a fundraise, review it monthly. Otherwise, review it at least quarterly.

Should convertible notes appear on the cap table?

Yes. Show them separately if they have not converted, but include their principal, discount, valuation cap, maturity, and conversion assumptions in a fully diluted model. Ignoring them gives you a false ownership picture.

What is the difference between issued and fully diluted shares?

Issued shares are already allotted and owned. Fully diluted shares include issued shares plus options, warrants, and other instruments assumed to convert or be exercised. Investors usually want both views.

How are ESOPs shown in a cap table?

Show the approved pool, granted options, vested options, exercised options, lapsed options, and unallocated balance separately. Do not describe the entire reserved pool as employee ownership.

Can I manage a cap table in Excel?

Yes, if the company is small and the spreadsheet has controlled formulas, a transaction ledger, version history, and separate scenario models. Move to dedicated software when instruments, grants, and investors become difficult to track manually.

What happens if the cap table does not match MCA records?

Do not edit one record to force a match. Identify whether the issue is a spreadsheet error, missing filing, invalid transfer, incorrect allotment, or incomplete documentation. Ask your company secretary and counsel to determine the proper correction.

What cap table mistakes reduce startup valuation?

Unresolved founder disputes, dead equity, undocumented promises, missing filings, unclear convertibles, excessive advisor grants, and investor rights hidden in side letters all reduce confidence. Investors may delay the round or demand corrective action before investing.

How does an ESOP pool affect founder dilution?

If the pool is increased before the financing, existing shareholders commonly absorb more of that dilution. If it is created after the investment, the new investor shares more of the effect. Always compare the pre-money and post-money versions.