Compliance
Your Cap Table Platform Is Shutting Down: Is Your 409A Still Safe?
A platform wind-down doesn't void your 409A. Founders and finance leads: what the 12-month safe harbor protects, what to save, and when to order the next report
By 409.AI Team - 2026-10-11
# Your Cap Table Platform Is Shutting Down: Is Your 409A Still Safe?
If your equity records live on a platform that has announced a wind-down, the first worry is the data export. The second is quieter and costs more if you get it wrong: the 409A valuation that sets your option strike price. This article is for the founder or startup finance lead who still has grants to make, and who needs to know whether the report in the folder keeps protecting them.
The short answer is yes, in most cases. A 409A valuation is a document, and a document does not expire when its issuer closes. What can fail is everything around it: the file you can no longer retrieve, the person who could defend it, and the cap table you migrate it onto.
What the safe harbor actually protects
The rule sits in Treasury Regulation §1.409A-1(b)(5)(iv)(B). Stock options are exempt from Section 409A only if the strike price is at least the fair market value of the stock on the grant date. For stock that is not publicly traded, the regulation says fair market value is the value produced by a reasonable valuation method, applied reasonably as of a valuation date.
It then lists methods the IRS presumes reasonable. The one most startups use is an independent appraisal that is no more than 12 months old at the time of the grant. The IRS can overcome that presumption only by showing the method or its application was grossly unreasonable. That is a high bar, and it is the reason a clean report matters.
Two details in the text decide the question in this article. First, the 12 months run from the valuation date to the grant date, not from the day the platform delivered the PDF. Second, a valuation cannot be relied on if it ignores material information available at the time of the grant, or if it no longer reflects material events since the valuation date, even inside the 12 months.
Nothing in that language ties the presumption to the vendor. It ties it to the appraisal, its date, and the facts it used.
What a shutdown changes, and what it does not
Take a company with a valuation dated March 31 at $1.20 per common share. The platform announces it will close on December 8. Here is how the clock and the safe harbor behave.
The report stays valid. Grants made through the following March 30 can still be priced at $1.20, as long as no material event has happened. The vendor's closing is not a material event about your company. A priced round, a term sheet, a large customer win or loss, a bridge on new terms, an acquisition approach and a tender offer are. If one of those happens, the old report stops supporting new grants whatever the calendar says. The same logic is covered in [how often you should get a 409A valuation](https://www.409.ai/articles/409a-valuation-frequency-how-often-should-you-get-one).
The support disappears. This is the real exposure. If the IRS or an auditor asks about a grant two years from now, someone has to explain the discount for lack of marketability, the comparable companies and the allocation method. The provider that wrote the report may not exist to do it. Our walkthrough of [what an IRS document request for a 409A looks like](https://www.409.ai/articles/irs-audit-409a-valuation-document-request) shows how much of that conversation is about the file, not the number.
The data can be incomplete. An export usually gives you the final PDF. It often does not give you the management inputs, the cap table snapshot used on the valuation date or the engagement letter. Those are the documents that show the appraiser used material information.
The cost of getting it wrong
If an option is priced below fair market value on the grant date, it can fall under Section 409A. The employee then owes regular income tax on the spread as it vests, plus an additional 20 percent tax and premium interest under IRC §409A(a)(1)(B). The company carries withholding and reporting risk. Corrections exist but are narrow, and our guides to [fixing an incorrect 409A valuation](https://www.409.ai/articles/dealing-with-incorrect-409a-valuations) and to [the correction deadlines](https://www.409.ai/articles/409a-valuation-deadline-correction-procedures) show how little room there is once a tax year closes.
A worked example makes the stakes plain. An engineer holds 20,000 options with a $1.20 strike. An IRS examiner later concludes fair market value on the grant date was $2.00. Spread of $0.80 across 20,000 shares is $16,000. If the options fall under Section 409A, that $16,000 is income when the shares vest, with the 20 percent additional tax of $3,200 on top, before interest and ordinary income tax. Multiply by a team of 30 and a single weak file becomes a serious problem.
A retention checklist, before the lights go out
Treat the wind-down as a deadline for building your own valuation file. Pull these items while the platform still answers your login.
1. Every 409A report, final and signed, for every valuation date, not only the latest. 2. The valuation inputs: the cap table as of each valuation date, the financial statements and projections you gave the appraiser, and the list of material events you disclosed. 3. The engagement letter and the appraiser's credentials. The regulation's reasonable-method language leans on the valuer's qualifications, and an auditor will ask who signed. 4. Board minutes approving each grant batch, with the date and the strike price. The strike is tied to the grant date, and the [board approval date, not the offer letter](https://www.409.ai/articles/option-grant-date-board-approval-409a-strike-price), is usually what sets it. 5. The grant ledger: grantee, shares, strike, vesting, the valuation relied on. 6. Any correspondence in which the provider explained an assumption.
Keep them in a folder you control, outside the vendor, and name each file with its valuation date. Our [cap table migration checklist](https://www.409.ai/articles/cap-table-migration-records-checklist) covers the other half of the move, the share ledger itself.
Choosing the next provider
You do not need to wait for the old platform to close. The next valuation is due at the earlier of 12 months or a material event, and a migration often lands close to a financing or an audit anyway.
Ask a new provider the questions a safe harbor depends on. Is the valuation an independent appraisal? Who is the signing appraiser and what is their experience with companies at your stage? Will they hand you the full report and not a dashboard link? Will they stand behind it in an examination or an audit? The difference between a price you can defend and one that only looks official is explained in our piece on [the safe harbor price versus a qualified appraiser](https://www.409.ai/articles/409a-safe-harbor-price-vs-qualified-appraiser).
Also check independence. If your auditor will test the valuation, the auditor independence rule may rule out the provider you assumed you could use.
Timing matters too. A standard turnaround is days, not hours, and the data request takes the longest part of it, as described in [how long a 409A takes](https://www.409.ai/articles/how-long-does-a-409a-valuation-take). If you plan grants for the first quarter, start the request before the old platform closes so the new report is dated close to the transition.
What to do this week
Download the reports and the inputs today, then check the valuation date on the newest one. If it is more than nine months old, or a round or tender is in sight, order the next valuation now rather than pricing grants on a report that is about to lapse. If it is recent and nothing material has changed, keep granting at that price, document each board approval, and let the new provider's report pick up at the next trigger.
When you are ready for the next report, [409.AI](https://www.409.ai/products/409a) produces a 409A valuation reviewed by a valuation expert, from $899, and you receive the full report and the working file, not a login that can disappear.