Cap Table Cleanup Before an IPO: Founder Shares, ESOP, Warrants

The cap table that served a startup through its venture rounds is rarely fit for public-market scrutiny. Pre-IPO cap table cleanup involves: Founder Shares — consolidating founder holdings into a clean holding structure (typically a BVI or HK holding company), resolving any verbal or undocumented share transfers between co-founders, and ensuring each founder’s equity is fully vested or has a disclosed vesting schedule. ESOP — ensuring the employee share option plan has sufficient headroom for post-IPO grants (typically 5-10% of post-IPO share capital), converting any outstanding promises or verbal grants into formal option grants with documented strike prices, and resolving the tax treatment of options for employees in multiple jurisdictions. Warrants and Convertible Instruments — all outstanding warrants, SAFEs and convertible notes must be either exercised/converted before the IPO or fully disclosed with their dilutive impact modelled. The single most common cap table problem discovered during IPO due diligence is undocumented founder share transfers — a founder ‘gave 2% to his brother-in-law’ with no legal documentation, creating a ownership gap that can delay the listing.