Cap Table Structuring

This article reflects the law and SECP practice as of July 2026. Filing periods, forms, and fee schedules change; treat every bracketed item as requiring confirmation on current sources before you rely on it.

Founders talk about the cap table as if it were a spreadsheet. In Pakistan it is three things, and the spreadsheet is the least authoritative of them. The first is the register of members the Companies Act, 2017 requires the company to maintain — the legal record of who holds what. The second is the SECP's filed record: the incorporation documents, every return of allotment, every registered transfer, every change to authorised capital. The third is the spreadsheet, which is a management summary that is only as good as its reconciliation to the first two. Structuring a cap table well means making decisions that keep all three aligned as the company takes on a pool, convertible instruments, and investors — because every serious raise begins with someone else's lawyer checking whether they align.

Where the shares legally live

A share in a Pakistani company exists when it is allotted or transferred and the holder is entered in the register of members. Around that moment the Act builds formalities: a return of allotment filed with the SECP within the statutory period, share certificates issued within their own statutory window, and, for transfers, a proper instrument of transfer bearing stamp duty under the provincial stamp law before the board registers it [CURRENT FILING PERIODS AND FORMS — TO BE VERIFIED BY REVIEWING LAWYER]. None of these steps is decorative. An allotment that was never filed, or a transfer on an unstamped instrument, is a defect that survives quietly for years and then surfaces in diligence, where the question "who actually owns this company" becomes a condition to closing.

The practical discipline is single ownership of the record. One person — a founder, the company secretary, or external counsel — owns the cap table, and no equity event happens without passing through them: no side-letter to an advisor, no verbal top-up, no transfer between founders. Most cap table damage is not fraud; it is decentralised promising.

Authorised capital and headroom

The memorandum states the company's authorised capital — the ceiling on what it may issue. Registration and filing fees scale with the ceiling, so founders often incorporate with the minimum and forget it. That works until the day the pool, a SAFE conversion, and a priced round together need more shares than the ceiling allows, and the closing acquires a new critical path: a general meeting, a resolution, an SECP filing, and a fee, all on the investor's clock [PROCEDURE AND FEES FOR INCREASING AUTHORISED CAPITAL — TO BE VERIFIED BY REVIEWING LAWYER].

The structuring habit that avoids this is to size authorised capital against the fully diluted future, not the paid-up present: current holdings, plus the pool at its full intended size, plus every convertible instrument converting at its cap, plus a margin. Headroom costs a somewhat higher fee. The absence of headroom costs a delayed round.

Face value, premium, and the arithmetic underneath

Pakistani shares carry a face value — ten rupees is the common market choice, though the figure is the company's to set. Shares can be issued at a premium above face value, which is how a priced round expresses valuation. Issues below face value are restricted: the Act permits discounted issues only on conditions, and certain issues attract valuation and disclosure requirements under the SECP's further-issue regime [DISCOUNT PROVISIONS AND THE COMPANIES (FURTHER ISSUE OF SHARES) REGULATIONS 2020 — TO BE VERIFIED BY REVIEWING LAWYER].

This arithmetic matters more than it looks, in two places. First, conversion prices: a SAFE cap or note discount that implies a price below face value collides with the discount restrictions, so the face value should be set low enough, and the share numbers large enough, that conversion math never approaches the floor. Second, granularity: fractional shares are not the working assumption in Pakistani practice, so a company with 1,000 shares on issue cannot give an advisor 0.25 per cent cleanly. Incorporate with, or subdivide to, a share count in the millions; the fine-grained splits that pools and instruments require then resolve into whole shares.

Classes of shares and investor rights

The Companies Act, 2017 permits a company to have different kinds and classes of shares, and this is where investor economics live in a priced round: preference shares carrying a liquidation preference, anti-dilution protection, conversion rights, and defined voting arrangements. Two cautions apply. The rights exist only where they are actually created — in the articles and the terms of issue, adopted with the proper resolutions — and imported term sheets assume mechanics, such as automatic conversion of preference into ordinary shares, that need deliberate Pakistani drafting rather than transplantation [PERMISSIBLE CLASSES AND RIGHTS UNDER THE ACT AND APPLICABLE REGULATIONS — TO BE VERIFIED BY REVIEWING LAWYER]. And once a class exists, its rights are protected: varying them engages class-consent requirements, so every new class added to the cap table is a future consent-gathering exercise. Add classes deliberately and rarely.

Promised equity: the shadow cap table

Most startups carry a second, invisible cap table: the pool that was announced but never authorised, the advisor on two per cent by email, the SAFEs signed last year, the note maturing next year. Each of these is a claim on future shares, and each future issue must pass through section 83 of the Companies Act, 2017 — the pre-emption principle under which new shares are first offered to existing members, departed from only with the prescribed shareholder authority [MECHANISM FOR PRIVATE COMPANIES — TO BE VERIFIED BY REVIEWING LAWYER].

The structuring rule is to move the shadow into the light on the day the promise is made: authorise the departure from pre-emption when the SAFE is signed, define the pool as a share count when it is announced, paper the advisor grant when it is agreed. And model everything fully diluted. When a term sheet asks for the pool to be topped up "pre-money" — the pool shuffle — the dilution lands on the founders, not the incoming investor; you negotiate that only if your model shows it.

Foreign holders on the register

A non-resident on the cap table adds an exchange-control dimension governed by the Foreign Exchange Regulation Act, 1947 and the State Bank's Foreign Exchange Manual. The investment should arrive as a remittance through the banking channel; the issue of shares to the non-resident is reported to the State Bank through the authorised dealer alongside the SECP filing; and that paper trail is what makes the holding repatriable when dividends or exit proceeds later flow out [CURRENT REPORTING REQUIREMENTS UNDER THE FE MANUAL — TO BE VERIFIED BY REVIEWING LAWYER]. On the cap table itself, tag every foreign holding with its remittance reference and reporting confirmation. A foreign shareholding without its banking paper trail is a diligence finding with a price attached, and reconstruction after the fact is slow at best.

The cap table as a diligence document

Every funding round, and eventually every exit, begins with reconciliation: spreadsheet to register, register to SECP record, foreign holdings to bank confirmations, promises to authorities. The recurring gaps are familiar — the unfiled allotment, the unstamped founder transfer, the pool with no resolution behind it, the departed shareholder nobody can reach, the remittance that went to a personal account. All are cheaper to fix in a calm quarter than in the three weeks between term sheet and closing, which is the argument for running the reconciliation quarterly as a habit rather than annually as an emergency. A clean cap table does not make a company fundable. It stops a fundable company from looking unfundable at the worst possible moment.