Authorized Share Capital

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What is 'Authorized Share Capital'

Authorized share capital is the number of stock units that a publicly traded company can issue as stated in its articles of incorporation, or as agreed upon by shareholder vote. Authorized share capital is often not fully used by management in order to leave room for future issuance of additional stock in case the company needs to raise capital quickly. Another reason to keep shares in the company treasury is to retain a controlling interest in the company.

Also be called "authorized stock," "authorized shares" or "authorized capital stock."

BREAKING DOWN 'Authorized Share Capital'

Stock exchanges may require companies to have a minimum amount of authorized share capital as a requirement of being listed on the exchange. For example, the London Stock Exchange requires that a public limited company have at least £50,000 of authorized share capital to be listed. Authorized share capital may be greater than the shares available for trading. The shares that have actually been issued to the public and to the company's employees are known as "outstanding shares."

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RELATED FAQS
  1. What is the difference between authorized shares and outstanding shares?

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  2. What types of capital are not considered share capital?

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  3. Why is an increase in capital stock on a company's balance sheet a bad sign for stockholders?

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  4. Why would I need to know how many outstanding shares the shareholders have?

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  5. What is the difference between paid-up capital and share capital?

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