Meaning
A mathematical discrepancy arises between the aggregate sum of individual equity stakes recorded in a private company ledger and the total authorized shares listed in the corporate charter or formal documentation. This cap table divergence occurs when the sum of issued options, warrants, and common stock allocations fails to reconcile with the verified count of existing equity instruments. The phenomenon creates a legal ambiguity regarding ownership percentages and dilutive impacts during subsequent fundraising rounds.
Evidence Discrepancy
Practitioners verify this variance by performing a complete audit of every grant letter and exercise notice issued since the entity formed. Discrepancies often emerge because administrative staff track verbal commitments or informal spreadsheets rather than the official board-approved register. Disjointed record keeping transforms a simple count into a source of friction during due diligence.
Ownership Uncertainty
Investors require precise data to calculate the exact price per share during a financing event, and any gap in the numbers stops the transaction until the parties produce a single, binding version of the truth. Discrepancies represent a permanent loss of institutional memory that requires professional legal time to reconstruct.
Formal Correction
Resolution requires a definitive board resolution to overwrite the conflicting figures, ensuring the updated record matches the actual issuance history of the corporation. Professionals treat this alignment as a requirement for clean title transfer because ownership records act as the primary proof of interest in the entity.
