Stock and Option Record Keeping

The startup world moves fast; your company, potential investors, and potential employees are constantly making decisions that may impact your startup company’s capitalization. Many of these decisions will involve your stock and option records. Consequently, making good, quick decisions requires that your organization maintain accurate, accessible stock and option records. This guide will show you when it is important to have records and to offer a few tips about efficient record keeping.

When will it be important to have accurate records?

Accurate records will come in handy when you are:

• Recruiting and terminating directors, officers, and employees
• Considering new financing or selling your company

Tips for keeping records

Now that you know how important it is to keep accurate stock and options records, how should you go about it? We recommend these three basic steps.

Collect and record all documents

You should identify and collect all documents relating to:

• option agreements
• exercises/cancellations
• employee terminations
• common stock certificates by the company and employees

Your board will have to approve all stock and option grants. These legal actions should all be recorded.

It will be important to create and maintain a capitalization table. This table typically reflects which groups of people own which type of stock or option.

Digitalize all documents

All documents should be in digital form. This will help to keep them organized and easily accessible, which will be useful when you're ready for a financing or another major corporate transaction.

You should also consider developing a system that automates all transactions and calculations while creating a digital trail showing user changes to legal documents.

Compile all documents in one central location

There will be times when you will need swift access to all of your information all at once. For this reason, it is most efficient to gather all of these documents into one uniform, integrated system. Your system should be designed with access controls and emergency recovery protocols to prevent catastrophic failure or breach. The importance of this approach will only increase as your company continues to grow.