Cap table mistakes Irish founders make (and how to fix them)
By Dylan Holland, Founder, OnlineLegalServices.ie
The cap table is the operating financial document for any Irish company with more than one shareholder. It is also the single most-checked artefact in every fundraising due diligence process. And yet — across hundreds of Irish startups — the cap-table mistakes we see at OnlineLegalServices.ie are remarkably similar. This article walks through the most-common failure modes, what they cost at fundraise or exit, and how to clean them up before they become structural problems.
Mistake 1 — Promising equity without papering it
The most-common mistake by a wide margin. A founder promises a friend, an early advisor, or a contractor “1% of the company” via email, a Slack DM, or a handshake at a coffee shop. The promise sits on no document, no board resolution, no share register, no CRO filing. Eighteen months later, the founder is preparing for a Series Seed round. The advisor surfaces and asks where their 1% is. The investor asks for a cap table that includes “all granted-but-not-issued equity”. The founder cannot produce one because the promise was never papered.
The cleanup pattern: identify every informal equity promise; sit down with each promisee and convert the promise to either an Advisor Agreement (with proper option grant and vesting) or — if the promise has lapsed by mutual agreement — a written release. Our cap-table legal health check includes the diagnostic; our issue-new-shares pack handles the issue side.
Mistake 2 — No founder vesting
The second-most-common mistake. Two co-founders incorporate 50/50, write the share register accordingly, and never put vesting in place. Six months in, one co-founder leaves. They retain their 50% stake. The remaining founder builds the company alone and is permanently diluted by an absent co-founder who contributed six months of work and never returns. By the time the company raises a Series Seed, the absent founder’s passive 50% has become a dealbreaker — investors require it to be cleaned up before they invest.
Prevention: implement vesting at incorporation as part of the Founder Shareholders Agreement. Cure: retrofit vesting through a negotiated amendment to the Shareholders Agreement, ideally before fundraising starts so the absent founder is not negotiating from a strong position.
Mistake 3 — Diverging CRO filings
Every share issue and share transfer in an Irish private company should be reflected in (a) a board resolution, (b) the company’s own share register, and (c) a CRO B5 (issue) or B10 (transfer) filing within 28 days. Many Irish startups perfect (a) and (b) but skip (c) — the CRO filing — and over time the CRO record diverges from the company’s actual capital structure. At fundraise, investors run a CRO check and discover the divergence. The investor’s solicitor flags it as a diligence issue. The founder’s solicitor spends three weeks back-filing missed B5s and B10s, paying late-filing penalties for each.
Prevention: file every B5 and B10 within 28 days. Cure: cap-table legal health check identifies the divergences; back-filing is straightforward but penalty-laden. Our board resolution drafting service covers the supporting paperwork for any retrospective filings.
Mistake 4 — Constitution-cap-table mismatch
The constitution of an Irish company governs what share classes exist, what rights attach to each class, and what authority the directors have to issue new shares. When a startup raises a priced funding round, a new share class — typically Series Seed Preferred — is created. The constitution must be amended to authorise the new class, define its rights (liquidation preference, anti-dilution, redemption, conversion), and grant the directors the authority to issue. Many Irish startups raise rounds without properly amending the constitution, leaving the new share class on the cap table but not on the constitutional document — which is invalid as a matter of company law.
Our company constitution review picks up these mismatches and recommends the necessary amendments. Investors’ counsel almost always run this check; failing it during diligence delays closing.
Mistake 5 — Unrealistic option-pool sizing
Irish startups raising their first priced round typically need to commit to an “option pool” — a reserve of authorised but unissued shares set aside for future employee option grants. Investors require the pool to be sized to cover hiring plans for the next 18-24 months. The mistake: founders agree to a 10% pool because that is what the term sheet asks for, without modelling whether 10% actually covers the hiring plan. Eighteen months later, the company is out of options, every new hire is a dilution event, and the founders are paying for their early under-sizing in equity now.
Prevention: model the option pool against your actual hiring plan before signing the term sheet. Our investment readiness legal pack includes pool-sizing modelling.
Mistake 6 — Missing or inconsistent leaver provisions
Different shareholders join the cap table at different times under different agreements: founder shares, advisor option grants, employee option grants under KEEP, investor preferred shares, convertible-note conversions. Each agreement has (or should have) leaver provisions specifying what happens to the equity on departure. The mistake: founders inherit a patchwork of leaver provisions where some categories of shareholder have full leaver mechanics and others have none. At exit, the patchwork creates negotiating asymmetries that benefit nobody.
Prevention: at every new equity-issue event, check that the leaver provisions align with the existing agreements. Our cap-table legal health check includes a full leaver-provision audit.
Mistake 7 — Treating convertibles as cash
SAFEs and convertible notes do not appear on the cap table as shares — they are debt or contingent equity instruments that convert to shares at a later round. The mistake: founders treat the SAFE-funded cash as “raised” and ignore the dilution effect. When the priced round happens and the SAFEs convert, the founders are surprised by how much equity has been given away — often 25-35% combined across multiple SAFE rounds. Modelling fully-diluted cap tables that include SAFE conversion is essential.
Our SAFE/convertible note review includes a fully-diluted modelling exercise on each instrument.
Mistake 8 — No fully-diluted cap table
The cap table that founders see — basic shareholder list with percentages — is not the cap table that investors see. Investors see the fully-diluted cap table, which includes: every issued share, every option granted (vested and unvested), every option pool reserve (granted and ungranted), every convertible-note or SAFE outstanding, and every warrant or other equity-derivative instrument. The fully-diluted cap table is typically 10-25% larger than the basic one. Founders who present basic cap tables to investors look unprepared; founders who present fully-diluted cap tables look professional.
How to clean up
The cleanup sequence: (1) cap-table audit identifying every divergence, gap, and unpapered grant; (2) board resolutions ratifying any informal equity arrangements; (3) CRO back-filings for missed B5s and B10s; (4) Shareholders Agreement amendment introducing or correcting vesting; (5) constitution amendment if share classes have evolved; (6) full reconstruction of the fully-diluted cap table. Most cleanups take 3-6 weeks calendar time; complex ones with multiple divergences can take 8-12 weeks.
Three OLS products handle this: Cap-Table Legal Health Check for the diagnostic; Investment Readiness Legal Pack for the full pre-fundraise cleanup; Cap-Table Review Video Consultation for a same-week walkthrough of your specific situation.
Frequently asked questions
What is a cap table?
A cap table — capitalisation table — is a register of every shareholder of an Irish private company, the share class and number of shares each holds, the percentage ownership, and (for fully-loaded cap tables) the dilution effect of any outstanding options or convertible instruments. It is the operating financial document for any company with more than one shareholder, and the single most-checked artefact in every fundraising due diligence process.
How often should I update my cap table?
After every share issue, every option grant, every option exercise, every share transfer, and every change to the company’s share capital. In practice this means continuously — most well-run Irish startups maintain a live cap-table file (typically a spreadsheet or a tool like Capdesk or Carta) that is updated within 48 hours of any equity event. The CRO B5 filing within 28 days of any share issue or transfer is the legal corollary.
What is the most common cap-table mistake Irish founders make?
Granting equity informally — typically via email, a handshake, or a Slack message — and never papering it up with proper share-issue documentation, board resolutions, and CRO filings. Eight out of ten cap-table cleanups we run at OnlineLegalServices.ie involve untangling promised-but-not-issued equity from someone who joined the company in the early months and is now arguing about what they were promised.
Can a cap table be wrong at the CRO?
Yes — and surprisingly often. The CRO record (B5 share-issue filings, B10 share-transfer filings, annual return) is what the public sees, but the operative shareholder register is the one maintained by the company itself. Where the two diverge — typically because filings have been missed or filed late — the company’s register is what matters between shareholders, but the CRO record is what investors will rely on in due diligence. Cleaning up the divergence is part of standard pre-fundraise legal preparation.
What does a cap-table review actually involve?
A proper cap-table legal review covers: reconciliation of company register against CRO filings; identification of any unpapered or under-papered equity grants; review of share-issue board resolutions and Form B5s for compliance with the Companies Act 2014; review of any outstanding options or convertibles for dilution effect; check of the constitution against the actual capital structure; and a fully-diluted cap-table snapshot ready for investor diligence. Our €fixed-fee cap-table legal health check covers all six.
Get your cap table reviewed
If you are running an Irish startup with more than one shareholder and you have not had a cap-table legal review in the last 12 months, this is high-leverage. Cap-table legal health check, or book a 30-minute startup-shares advice call to walk through your specific situation. All pricing is published.
By Dylan Holland, Founder, OnlineLegalServices.ie / PLUSOLS LIMITED.
Reviewed by a qualified Irish solicitor regulated by the Law Society of Ireland. This article is general legal information for Irish startup founders and is not a substitute for advice on a specific matter. Pricing on linked product pages is current at the date of publication; please refer to the linked page for the live rate.
