Anytime a new business is set up, it is important to create a cap table to indicate who owns what percentage of the company. The problem is, as the business grows, even more actors will come into play. The business might attract new investors and shareholders at any point. To ensure that the data is accurate and up-to-date, cap tables need to have regular updates.
Read along as we explain what a cap table is and its benefits for any business. We will also delve into how using blockchain technology for a cap table is better than just having it digitized.
What Is a Cap Table for a Business?
A cap table, or capitalization table, is a document that lists the shareholders of a company and their respective shares in that company. It’s an important record for any business as it provides an overview of who owns and controls the company.
In the past, cap tables were usually maintained and managed on paper or in a digital spreadsheet. But this can be a tricky and time-consuming process, especially when it comes to tracking real-time changes and updates. Hence, more and more businesses are looking to register their cap tables on the blockchain.
The blockchain is a distributed database that allows for secure and transparent recording of transactions. This makes it the perfect platform for registering cap tables, as it eliminates the need for third-party intermediaries and allows for real-time tracking of changes and updates.
Why is a Cap Table Important for any Business?
A company’s cap table is one of the most important records a business has. It documents the shareholders, their ownership stakes, and the value of those stakes. This information is essential for any business, whether it’s a startup or a publicly traded company.
That’s because the cap table is a key document in any company’s financing efforts. It shows investors and potential investors who own the company, and how much they have invested. This information is also used in bankruptcy proceedings and other legal disputes.
That’s why it’s so important to have an accurate and up-to-date cap table. And it may become hard to make sound financial decisions without it.
Despite its importance, many businesses still don’t have a cap table. This may be because they are not aware of the benefits of having one or because they don’t know how to create one. However, it’s crucial for businesses to have a cap table, especially if they are planning on raising capital or going public. Without a cap table, it can be much harder for a company to attract investors or sell shares to the public.
What Are the Benefits of Transitioning to Blockchain-Registered Cap Table?
In a 2020 study published by Deloitte, 55% of respondents said that blockchain technology will be critical and, in their top-five strategic priorities. This number increases from 53% of respondents in 2019, and 43% of respondents in 2018 who felt the same. This highlights that the integration of blockchain technology with existing systems remains a top priority by the majority. An exciting development in the world of cap tables is the ability to transition existing cap tables to the blockchain.
Once your register your company’s cap table on the blockchain, you have a number of benefits. First, this process creates a permanent, immutable record of all your company’s equity ownership and transactions. This digital ledger is visible to everyone who has access to it. It provides transparency for shareholders, as they can see exactly how many shares they own and who else owns shares in the company. It also prevents fraud and makes it easier to transfer shares between shareholders.
Second, having your cap table on the blockchain enables you to instantly approve and execute transactions with investors and stakeholders in real-time. This eliminates long delays in data sharing and ensures accuracy.
Lastly, blockchain also provides an excellent system for tracking ownership percentages over time, as well as any changes or modifications made to the cap table.
How to Ensure Security and Accuracy for Cap Tables?
It’s essential that your company’s cap table is accurate and secure when you implement it on the blockchain. To ensure this, you have to guarantee that all the information is up-to-date and correctly represented.
You should also ensure that the users of your business have the appropriate access. This way, only authorized personnel can view the information, reducing any chances of unauthorized access or tampering with company records.
By taking these measures, you can ensure that your company’s blockchain-based cap table remains accurate and secure.
Future Trends for Registering Business Cap Tables on the Blockchain
This expediency could revolutionize the way private companies manage their capital and facilitate a more efficient and cost-effective way of transferring ownership. Additionally, investors and shareholders would have real-time access to ownership information which could potentially reduce governance costs.
This would be especially beneficial to private businesses that are not listed on equity platforms, unlike their public counterparts. Having a blockchain-enabled cap table could be the first step to helping your business enter the private equity market. Once you have a blockchain-based cap table, your shares are represented as tokens. These tokens can be used to buy, sell, or transfer ownership rights in the private equity market. To learn more about how tokenization can have a major impact on the private equity market, read our article ‘Exploring How Tokenization Is Transforming Private Equity Markets’.
iOWNX for Businesses Helps you Get Your Company’s Cap Table on the Blockchain
For companies looking to transition their cap tables to the blockchain, iOWNX for Businesses is a good option. It is a platform that makes it easy to register and manage your cap table using blockchain technology.
Through iOWNX for Businesses, your company’s cap table can be represented on a wallet in the form of digital tokens. These tokens denote the current value of shares that someone holds in your company and this data is recorded on the blockchain. Then, your company’s cap table can be enabled by a smart contract. This smart table would ensure the automation of dividend distribution. Each token holder of this smart contract gets a stake in dividend distribution automatically into the wallet which holds the shares.
Even the company registrar would benefit from having all records on the blockchain as it will ease the registration process and give ultimate transparency to the UBOs of the companies registered with them.
Features of iOWNX for Businesses
iOWNX for Businesses offers several features for companies transitioning their cap table to the blockchain. For instance, businesses have access to a secure online dashboard that allows them to easily manage and track their tokens, as well as view and analyze their cap table in real-time.
Moreover, iOWNX for Businesses includes a built-in wallet that securely stores tokens and ensures that transfers are recorded on the blockchain. Additionally, companies can use the platform to register token holders onto the blockchain through KYC verification. This means that businesses can be compliant with the applicable regulations while also maximizing their liquidity.
How iOWNX for Businesses Can Help Your Business Become ‘Blockchain-Verified’
If you’re looking to transition your company’s cap table onto the blockchain, look out for iOWNX for Businesses, on the soon-to-be-launched iOWNX platform. And help your business get a tag of ‘Blockchain-Verified’.