What are Authorized Shares?

Authorized shares are the total number of shares that a corporation is legally allowed to issue, as stated in its articles of incorporation. The number of outstanding shares cannot exceed the number of authorized shares. When a company needs to sell additional shares, it can have the current shareholders approve an increase in the number of authorized shares. This request is usually put to the shareholders at the annual shareholders meeting; a majority of the shares held must vote in favor of this request in order to increase the number of authorized shares.

It is generally a good idea to maintain a large buffer between the number of authorized shares and outstanding shares , so that management is able to issue additional shares on short notice. For example, this allows a company to issue shares to acquire another business.

Terms Similar to Authorized Shares

Authorized shares are also known as authorized stock . They may also be known as authorized capital stock .