As an entrepreneur, especially one of a start-up or early-stage business, you have to monitor your company shares. But this is not fine and dandy, as the process implies several aspects to consider. And with so much on your plate, it can be easy to lose yourself in the pile of papers and digital documents that need to be constantly updated.
Each transaction implying the assignment, sale, or transfer of share certificates (documents proving the legal ownership of particular shares) has to be carefully recorded. Managing your company’s equity capitalisation, including investors, shareholders, convertible debt, and warrants, should not be burdensome, as there are capitalisation tables, or shortly, cap tables, that can help in this regard.
With technological advancements at your fingertips, it would be a pity not to put them to good use. Apart from cap table management software, there are many other ways to keep track of your company’s financial situation and assess the stock’s performance.
Be super vigilant concerning your ownership – consider these below recommendations:
OK, but first, what are shares, and why should you care?
Shares are ownership of an organisation, which individuals purchase to be part of that company leadership. Once you are a shareholder, you inevitably become involved in making critical decisions for that enterprise. People who purchase and sell shares on the stock market are shareholders. Corporations are generally run by shareholders, from whom each has a certain number of shares. These shares are vital, as they practically determine the worth of a company – the more outstanding shares a company has, the more valuable it becomes.
That old record book
Each corporation or start-up has to monitor who owns it, and whether there are many options to do so, that old registry book is still one of the most viable. In the past, business owners used to track company shareholders on paper, a sort of logbook held by the corporate secretary. Those days have passed, and that registry book is now reduced to secondary records. Still, it does not mean that it is no longer useful. On the contrary, it proves especially helpful in the event the Securities and Exchange Commission (SEC) has to verify your ownership records. Besides, it can be useful when potential investors request details about your shareholder structure. Since they have the right to inspect them once in a while, it would be wise to have this record book at hand.
Shareholder recording software
Shareholder tracking software is, without any doubt, the most practical solution to keep evidence of crucial ownership information. Most software applications offer template solutions that allow managers or people handling this task to maintain accurate and precise records and update them whenever necessary. There are also platforms that help founders and investors create capitalisation tables that unify and simplify equity management. Thus, they save time and resources by keeping everything from shares, financials, ESOPs (Employee Stock Ownership Plans), legal documents, and KPIs (Key Performance Indicators) in a single place. Increasingly more companies have opted for this cap table management solution, as it is secured through encryption, user-friendly, and easy to update.
Cap table management has never been easier with such diverse solutions to choose from. Cap tables are probably the most favoured options, as they help investors and creditors manage their most valuable corporate data, including the prices paid for securities. Plus, these tables are excellent for recording partial ownership. When someone (investor, employee, co-founder) is compensated with stock options or shares but only receives the full rights to them under particular conditions or over a certain time period, it is called share vesting. These requirements are usually established in a shareholder’s agreement or an employment contract. Vested shares can protect the shareholder in the event the organisation is sold, as they will most probably be paid off.
Another solution for monitoring your shareholder ownership is by using spreadsheet software. Companies often use this to track their capitalisation structure because it is user-friendly and at hand. Spreadsheets contain crucial information, including stock shares, transactions, and each shareholder file.
Companies in the early stages usually do not require complex documentation, so the use of software applications is not that urgent. But the more an organisation evolves, the more it will need a sound system in place to keep track of its cap shareholder ownership. Creditors and shareholders need to access any information relating to your shareholder structure easily, so consider entering critical data, such as dates of transactions and transfers, class of shares, par value of shares, and purchase price, in an accessible storage place.
At the end of the day, you can always email about transfers and transactions. The email box may be a less common recording place, but it does not mean it is not viable. Just imagine how it would be to lose data held in software applications because of a cybersecurity breach or another threat. But if you have copies of the most important transactions or transfers in the email box, you have just received a second chance. Thus, consider emailing the designated registry email each time a share of stock is sold, transferred, or assigned. You can send scanned copies of the documents or certificates in question to the company’s secretaries to keep them safe and sound.
If you are the receiver of such emails, ensure the sender that their transaction has been recorded and documented in the organisation’s corporate records and books.
Keeping track of your ownership and shareholders is by no means an easy job, but it is not that complicated. With actual technologies, shares and stocks can be tracked without much hassle. Cap tables and software applications are powerful tools in this sense, but there are also those traditional ways of tracking – registry books and emails – that never fails to be helpful.
When it comes to shareholder ownership, it is all about accuracy and transparency. Do you fulfil these requests?