Your cap table is the most important spreadsheet in your company, but it is only as trustworthy as the public record sitting behind it. Every time you issue shares, the government keeps its own version of the truth at the Ministry of Corporate Affairs (MCA), built from the forms your company files after each corporate action. When your internal cap table and the MCA record disagree, your next investor's lawyers will find out during due diligence, and the gap will cost you time and negotiating leverage. This lesson shows how to keep the two in sync.
The two records you are reconciling
The first is your cap table: your internal list of shareholders, share classes, numbers of shares, prices, and outstanding options. The second is the MCA record held by the Registrar of Companies (ROC), which is assembled from the statutory forms you file. Reconciliation simply means making sure these two always tell the same story.
File Form PAS-3 after every allotment
Whenever you issue new shares, whether through a priced round, conversion of a compulsorily convertible instrument such as CCPS, an ESOP exercise, a rights issue, or a bonus issue, that event is an allotment and must be reported to the ROC in Form PAS-3, the Return of Allotment. The legal basis is Section 39(4) and Section 42(9) of the Companies Act, 2013, read with Rules 12 and 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
The deadline depends on how you raised the money:
- 15 days from the date of allotment if the shares were issued by private placement under Section 42, which is how most angel and VC rounds are structured.
- 30 days from the date of allotment for other allotments, such as a rights issue or a bonus issue.
For a private placement, PAS-3 must carry the complete list of allottees with each one's full name, address, PAN, and email ID. Collect these from investors before you allot, not after.
PAS-3 is not the only record to update
A clean allotment leaves a full paper trail. Alongside PAS-3 you must:
- Pass a Board resolution approving the allotment.
- Update the register of members (Section 88, maintained in Form MGT-1) within 7 days of the Board approving the allotment.
- Deliver share certificates within two months of allotment, as required by Section 56(4).
- For a private placement, keep the record of offers in Form PAS-5 internally. This is not filed with the ROC but must exist.
- If any allottee is a foreign investor, also file Form FC-GPR on the RBI FIRMS portal within 30 days of allotment, routed through your AD bank. This is a separate FEMA requirement, not a substitute for the MCA filing.
What late or sloppy filing costs
Miss the PAS-3 deadline and the company and every officer in default face a penalty of Rs. 1,000 per day of continuing default, capped at Rs. 1,00,000. On top of that you pay MCA additional fees over the normal filing fee, and higher additional fees if you file late on two or more occasions within a 365 day window. The money is the smaller problem. The bigger one is that a mismatch is a red flag in every future diligence.
Why clean records speed up your next round
In due diligence, the investor's counsel pulls your company's master data from the MCA portal and matches it, line by line, against the cap table you hand them. If a past round was never filed, if share counts differ, or if an allottee's PAN is missing, the closing stalls while you rectify the record. That can mean condonation of delay, refiling, and legal fees, all sitting on the critical path to money actually reaching your bank account.
A cap table that reconciles cleanly to MCA does the opposite: it signals a well-run company and keeps you negotiating from strength. Treat reconciliation as a habit after every event, not a scramble before a round. Keep one master cap table, and after each allotment file PAS-3 on time, update the register of members, issue certificates, and store the challans, allotment lists, and valuation reports in one folder your company secretary and future investors can open on request.