Cap Table Clarity: Protect Control, Attract Capital

Many private companies treat their share registry as a formality. But when a transaction, dispute or audit arises, weak governance records are often the first thing to break. And they break hard.

Why Messy Share Records Kill Deals

Buyers and investors do not want surprises. Your share register is the first thing they review. If it looks inconsistent, outdated, or vague, most will walk. Here’s why:

• Unclear ownership = high risk. If past transfers were not properly documented, there is no certainty around who legally owns what. No investor or acquirer will proceed without clarity.

• Valuation drops with every red flag. Gaps in your records suggest broader governance issues. Sophisticated investors respond by applying a risk discount.

• Deals drag out. Simple transactions can blow out to six months when lawyers are forced to backfill historical resolutions and paperwork.

• Warranties become a trap. Most sale documents require you to warrant that your share capital is accurate. If it’s not, you risk claims well after the deal closes.

• Funding stalls. Lenders need to verify ownership, security interests, and director appointments. If the paperwork is wrong, the loan does not proceed.

What ASIC Cares About (and What It Doesn’t)

ASIC does not audit your filings, but they still matter:

• They record what you tell them. ASIC is a registry, not a referee. It assumes your lodgements are correct. You bear the risk if they are not.

• Late filings pile up. Penalties are small, but repeated failures signal poor governance to external parties.

• Director details matter most. Director appointments and resignations must be accurate. Mistakes here expose individuals to personal liability.

• Share capital changes must be reported. Changes to classes, rights, or total capital must be lodged within 28 days. Investors will check that your ASIC records match your internal ones.

• Historical filings stay online. Past mistakes, inconsistencies, or withdrawn filings remain searchable and can trigger concerns during diligence.

What to Document, and When

Getting your structure right is not just about accuracy. Timing matters too.

Share Transfers

• Signed transfer form

• Board resolution approving the transfer

• Updated member register

• New share certificate

• ASIC Form 484 lodged within 28 days

Director Appointments or Resignations

• Board or shareholder resolution

• Signed consent (incoming directors)

• Updated ASIC record and internal register

• Notify financiers if required

New Share or Unit Issues

• Board resolution

• Subscription forms

• Evidence of payment

• Updated register

• Share certificate

• ASIC lodgement and foreign investment checks if needed

Constitution Changes

• Special resolution (75% vote)

• Updated constitution

• ASIC notification

• File and store all signed resolutions

Why It Matters in the Real World

Good governance is not just for compliance. It affects valuation, deal speed, and risk allocation.

• Delays cost leverage. Buyers slow down. Deals lose momentum. You lose bargaining power.

• Disputes escalate. When founders fall out, the registry becomes the only trusted record. If it is unclear, the dispute gets worse and more expensive.

• Tax audits widen. If your cap table is sloppy, the ATO assumes there is more beneath the surface. What starts as a basic review can turn into a deep dive.

• Succession plans fall apart. Informal promises to family members mean nothing if shares were not transferred and registered properly.

• Funding costs rise. Banks penalise sloppy governance. Expect higher interest, stricter terms, and more documentation.

• Directors become personally exposed. Courts are more likely to lift the corporate veil if records are inconsistent or incomplete.

How to Fix It

You don’t need a full overhaul. Just a clear process and a good advisor.

• Start with a file audit. Compare ASIC records with your internal registry. Find the gaps.

• Rebuild your cap table. Create a clean timeline of every share issue, transfer, or restructure since incorporation.

• Ratify what you can. Use current resolutions to formally approve historical steps where paperwork is missing.

• Use templates. Set up clear, repeatable documents for all common transactions.

• Go digital. Ditch the paper and maintain secure, backed-up digital records.

• Set reminders. Build a governance calendar to stay on top of filings and board actions.

• Use cap table software. If your structure is complex or active, automation helps avoid mistakes.

Final Word

Your share registry defines who owns your company. It underpins every transaction and every right attached to ownership. Yet it’s often overlooked until the damage is done.

The cost of fixing it is low compared to the cost of failing a deal, losing a buyer, or being dragged into a dispute.

Need help cleaning it up? MWBL offers legal spring cleaning for private companies.

This content is general information only and does not constitute legal advice. For tailored guidance, contact MWBL Consulting.