Cap Table and Vesting Plans
The cap table shows who holds how many shares in a company, and it changes with every funding round, every employee option and every share transfer. We keep your cap table consistent with the legal records, and design vesting structures for founders and share option plans for employees that can be implemented under Turkish law.
What is a cap table?
A cap table (capitalisation table) shows the company’s shareholders, the number and percentage of shares each holds, share classes, employee options and instruments that may convert into shares, such as SAFEs or convertible notes. Investors calculate the valuation and their own percentage from this table.
The cap table must match the trade registry records, the share ledger and the general assembly resolutions exactly. Inconsistencies are among the problems most often found in due diligence for funding rounds.
What is vesting, and how does it work under Turkish law?
Vesting means founders or employees earn their shares gradually over a period. A typical structure has a four-year period and a one-year cliff; if the person leaves before the period ends, the shares they have not earned are taken back or never granted.
Vesting is not directly regulated under Turkish law. For founders, it is usually set up in the shareholders’ agreement through a buy-back mechanism providing for unvested shares to be transferred to the other shareholders or the company at a set price on departure. For employees, share option plans or phantom share plans, which provide for a cash payment instead of shares, are used.
Scope
- Cap table management and designing vesting plans for employees and founders
- Preparing employee share option plans (ESOPs) and phantom share plans
- Bringing the cap table in line with the trade registry and share ledger records
- Checking dilution calculations in funding rounds
How We Work
- Identifying the current ownership structure, the records and any oral or written promises of shares
- Comparing the cap table with the legal records and correcting it
- Building the founder vesting structure into the shareholders’ agreement
- Designing the employee option or phantom share plan; coordinating with the financial adviser on tax
- Preparing the agreements and information documents to be given to employees under the plan
Team
Frequently Asked Questions
Should vesting also apply to founders?
Investors often ask for it, and it also benefits the founders. If one founder leaves early, the shares they have not earned go back to those who stay, and the company is not left with a non-contributing shareholder holding a large stake.
What are the ways to give employees shares in the company?
The main routes are founders transferring some of their own shares, a capital increase for employees, and the company acquiring its own shares within statutory limits and transferring them to employees. Each has different company law and tax consequences; phantom share plans, which provide for a cash payment instead of a share transfer, are a simpler alternative.
What is a phantom share?
A phantom share plan provides for a cash payment equal to the value of a share when the company is sold or a specified event occurs, without giving the employee actual shares. The employee does not become a shareholder, and no general assembly or share transfer formalities are needed. This is why such plans are often preferred by early-stage start-ups.
What are the tax consequences of an option plan?
Depending on the structure, the share or cash benefit given to the employee may be treated as wages and give rise to income tax and social security contributions. The tax effect of the plan should be assessed with the financial adviser at the design stage.
Would you like to discuss this service? Schedule a meeting with us — the first meeting is free of charge.
Schedule a meeting