Also known as: authorized capital stocks · authorized shares · authorized capital
Written by attorneys · grounded in primary & secondary sources — see below
The maximum number of shares of each class that a corporation's articles of incorporation permit it to issue. The figure appears as a fixed total in the public filing and sets the ceiling on equity the corporation may distribute without further amendment.
Aurora Biotech's board declares a 10 percent share dividend on its single class of common stock. Because the corporation lacks enough authorized but unissued shares, the board adopts an amendment under the statute that increases the total number of authorized shares to the exact amount needed for the dividend. The amendment takes effect upon filing and allows the corporation to issue the additional shares without shareholder approval.
Aether Technologies acquires 200,000 of its own common shares in a repurchase and the articles prohibit reissuance of acquired shares. The corporation files an amendment that reduces the total number of authorized shares by exactly 200,000. The reduction occurs automatically under the statute and lowers the ceiling on future equity issuances.
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The statute requires the articles to list a fixed number so that creditors, investors, and regulators can determine from the public record the maximum equity the corporation may issue. An indefinite reference such as a reasonable number or an internal schedule fails this requirement and causes the filing office to reject the articles.
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Acquired shares remain authorized but unissued unless the articles prohibit reissuance. When reissuance is prohibited, the number of authorized shares is reduced by the number acquired and the corporation must file an amendment reflecting the reduction.
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Yes, when only one class of shares is outstanding the board may amend the articles without shareholder approval to increase authorized shares to the extent necessary for a share dividend. The amendment must be filed with the secretary of state to become effective.
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