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Cap Table Legal Review Checklist
River reconciles every share, option and warrant to the document behind it, then checks the running total against the ceiling that existed that day.
Every line on a cap table is a claim that a named document authorized a specific number of shares on a specific day. River rebuilds that chain. Each issuance, option grant, warrant and convertible is traced back to the board consent, plan or instrument behind it, then measured against the share count the charter authorized at the time. What comes back is a sheet where every row carries its authority and its arithmetic, and a memo covering only the rows that fail.
A diligence checklist asks whether the board consent exists. That question comes back yes for most defects worth finding, because the ones that survive years of review are the ones with signatures on them. This run does not stop at the document. It carries a running total of shares issued, subscribed and otherwise committed forward through every charter amendment, so an issuance with no room on its own date surfaces even when today's numbers balance perfectly.
Corporate associates and in-house counsel run this before a term sheet is signed, when a buyer's diligence request lands, or when a valuation provider needs the grant register to tie out. It sits after the company's own minute book has been counted, before the data room opens to the other side's counsel, and well before the day the transaction actually closes. A defect found here is a board consent and a month of lead time. The same defect found in diligence is a disclosure schedule and a price conversation.
The ceiling is not authorized minus outstanding
Delaware does not state the ceiling as a comparison against shares outstanding. Section 161 lets directors issue more stock only where the authorized shares have not been issued, subscribed for, or otherwise committed to be issued. That last clause is the one spreadsheets drop. A plan reserve, an outstanding warrant and the shares underlying a convertible note are all committed, so real headroom is authorized minus issued minus everything already spoken for. Report authorized minus outstanding and a company can run out of shares while its cap table still shows millions free.
Halyard Robotics, a Delaware company, had 10,000,000 common authorized, 7,000,000 outstanding, a 180,000 share lender warrant and a 1,200,000 share plan reserve. A December 2022 consent raised the reserve to 2,650,000, which left 170,000 of room. In February 2023 the board issued 240,000 shares to a design agency in payment of an invoice. Commitments reached 10,070,000, seventy thousand past the ceiling. The charter went to 14,000,000 a month later, so the cap table now balances with 3,930,000 spare and nothing on it points at February.
The tax side runs its own arithmetic and no grant agreement can show it. Options are incentive stock options only up to $100,000 of grant-date value becoming exercisable for the first time in one calendar year, counted across grants in the order they were made. One Halyard engineer had 24,000 shares valued at $0.60 and 82,500 valued at $1.60 become first exercisable during 2025. That totals $146,400. Twenty-nine thousand of those shares are non-qualified options, whatever the two signed agreements call them.
How it works
Hand over the records
The cap table export, the charter with every amendment, the plan documents, the consents and the grant agreements.
Charter history first
Every amendment gets dated, so the authorized count for each class is known on every issuance date.
Lines get reconciled
Each row is matched to its authority, then added to the running commitment total for its class.
Defects come back sorted
Each failure carries its cure, the approvals that cure needs, and what it blocks until it clears.
What you get
- Every share, option, warrant and convertible traced to the consent or instrument that authorized it
- A running commitment total carried through each charter amendment, so headroom is read as of the date
- Plan reserves, warrants and convertible shares counted against the ceiling, because the statute counts them too
- Each option grant retested against the hundred thousand dollar limit and re-split into qualified and non-qualified
- Exercise prices checked against the valuation in force on the grant date, not the current report
- Every defect written up with its cure, the approvals it needs and what it blocks
Common questions
Our cap table is a spreadsheet, not Carta. Does that matter?
No. The input is whatever records exist, whether that is a platform export, a stock ledger kept in Excel, or a folder of certificates. What matters is that the underlying documents come with it. Rows with nothing behind them are reported as unsupported rather than quietly treated as reconciled, and the run says which rows those are.
What happens when a board consent is missing?
The row is marked unsupported, not wrong. A document that is absent and a document that authorized something different are separate findings with separate cures, and collapsing them is how a diligence response goes out claiming a defect the company does not have. Each unsupported row records what was searched, so the gap is a question rather than a verdict.
Can it fix an over-issuance?
No, and nothing automated should. Delaware runs one route through the board, sometimes a stockholder vote and sometimes a filing, and a separate court route where the board itself is defective. The run names the shares issued without authority, the date it happened and which route the facts point at. Choosing and signing is a lawyer's job, and counting the consents behind every corporate act is the neighboring problem.
Does this check securities law compliance?
It checks the exemption arithmetic a cap table can answer. Rule 701 caps what a private company may sell under a compensatory plan in any twelve months, at the greatest of $1,000,000, 15% of total assets or 15% of the outstanding class. An option counts on its grant date, at the exercise price, so nothing appears on the ledger.
What about SAFEs and convertible notes?
They are commitments, so they belong in the running total even though no share has been issued yet. The run records the conversion mechanic, the class the shares would come from and the trigger, then carries that share count against the ceiling for that class. A note that cannot convert for want of authorized preferred is a finding, not a footnote.
Which valuation does an exercise price get checked against?
The one in force on the grant date, which is often not the report on file today. A grant dated three weeks after a new valuation was delivered, but priced off the previous one, is a defect the grant agreement records perfectly. The agreement states a price and never states which report the price came from.
Does this replace what a buyer's counsel will do?
It anticipates it. The rows a buyer pulls are the ones carrying a number that does not tie to a document, and those are the rows this produces first. Running it early turns a disclosure schedule item into a board consent, which is why it belongs beside the request list a data room gets read against.
Cap Table Legal Review Checklist
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