Easy Ways to Understand the Authorized Share Capital

Is it known that joint holding companies can divide their capital into small units? It is important to note, however, that each share has a face value. To consolidate a company’s financial position, share capital refers to capital raised by the company. Capital can be infused into the company or public shares can be issued under defined circumstances. An organization’s share capital represents the value of all its shares at any given time.

Authorized Share Capital: What is it?

In order for a company to allow stakeholders access, it needs to have an authorized share capital. It is important to note that the amount described in the articles of association remains the same.e same. Sometimes, the authorized share capital may also be referred to as the authorised stock, the authorised shares, or the authorised capital stock, depending on the situation. 

As far as I am aware, it is not possible for a company to raise more shares than its authorised share capital to issue to shareholders. In light of this, it is not uncommon for companies to register with capital that is far beyond their current financial needs and which is not fully utilized by the management of the company. 

Additionally, the company should be able to issue additional stock at the same time. In the event that a company needs to raise capital as quickly as possible, this can be done later.

A sample of an authorized share capital

Considering the share value of each unit is important if a company has an authorised share capital of 500,000 shares. It is possible to determine the share capital under consideration by multiplying the number of shares by the value of the shares. However, share capital is allocated in accordance with statutory requirements. To maintain control of capital, shares are sometimes held in treasury. As stated by the stakeholders, it’s sensible not to do this.

The shareholders would have a greater influence over the company’s decisions if the company sold all of these shares.

Additionally, if the company were a start-up, keeping the authorised share capital high and the actual issued capital low may allow for additional financing rounds. 

Authorized Share Capital: How Does It Work?

Floating share capital can be achieved by filing its articles of incorporation in a specific location. The state in which the company operates, however, can be the same. As a result, the following specific issues have been identified.

  • The corporate charter provides critical information about the company, 
  • In addition to the name and other details, stakeholding can be determined at the company’s discretion
  • The issued and paid-up capital is not taken into account when determining authorised shares
  • Additional shares may be issued by the company if necessary
  • On the other hand, if a company wants to increase its authorised share capital, it must amend its corporate charter. A shareholder vote is usually required for this. 
  • When stakeholder approval is obtained, more shares can be issued at any given time.
  • As more shares are issued, current shareholders’ ownership could be diluted.

How does it affect individual investors?

The concept of authorised share capital may not be of concern to an individual investor at any given time.  Market capitalization is calculated based on the value of a company’s outstanding shares. It also determines the amount of ownership each share provides.

What is the relevance of the company’s authorised share at any given moment?  In the event the board of directors wishes to amend the articles of incorporation to increase the authorised share capital, the authorised share capital may become more relevant. When such a change in stakeholding pattern occurs, you may be eligible for an absolute right to vote as a stakeholder.

You can find out the difference between a company’s authorized shares and shares outstanding by consulting its articles of incorporation and latest quarterly report. 

There is a possibility, as with Microsoft, that the company’s outstanding shares represent only a small percentage of its authorised shares. A particular stakeholder is unlikely to vote anytime to bring about an amendment to the number of shares in such a case. 


Any organization’s pattern of stake holding is closely associated with its authorised share capital. There are several aspects associated with authorised share capital within a business organization’s stake holding structure. Share capital that has been authorised is very different from share capital that has been issued.

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