Also known as: authorized stocks · authorized shares · authorized capital stock
Written by attorneys · grounded in primary & secondary sources — see below
The maximum number of shares that a corporation may issue. This limit appears in the articles of incorporation and prevents the corporation from issuing shares beyond the stated total.
Argonaut Shipping has issued all of its authorized common shares. Its board declares a share dividend and adopts an amendment under the statute to increase the number of authorized shares by the exact amount needed for the dividend. The amendment takes effect upon filing without a shareholder vote because only one class of shares is outstanding.
Ford Motor Company’s articles authorize two million shares. Plaintiffs argue that the company’s accumulated capital cannot lawfully exceed that figure. The court rejects the claim because authorized stock sets only the ceiling on shares that may be issued, not a limit on the corporation’s total capital.
Select any source to read its text and confirm it supports the definition.
A bidder seeks to acquire a majority of a target’s shares. The target’s articles state a fixed number of authorized shares. The court examines the articles to determine the precise maximum number of shares that can be outstanding and therefore the percentage needed for control.
The articles of incorporation must set forth the number of shares the corporation is authorized to issue. This requirement is mandatory under the Model Business Corporation Act and establishes the corporation’s capital structure from the moment of formation.
The corporation lacks a defined capital structure. Ownership percentages and profit rights tied to shares become unreliable because no shares can be validly issued without an authorized total stated in the articles.
No. The articles must identify each class or series, state the number of shares in each, and describe the terms before any shares of that class or series are issued. Board resolutions alone cannot supply missing charter provisions.
No. Authorized stock is the maximum the corporation may issue. Outstanding shares are those that have been issued and remain in shareholders’ hands. The corporation may never issue shares beyond the authorized total.
…the Court by Ostrander. concurring: Moore. Majority opinion Opinion of Justice Ostrander (after stating the facts). The authorized capital stock of the defendant company is $2,000,000. Its capital, in July, 1916, invested in some form of property, including accounts receivable, was $78,278,418.65, and, less liabilities other than…