Form with which a corporation may alter the amount of outstanding shares issued by the corporation.
Form with which a corporation may alter the amount of outstanding shares issued by the corporation.
Authorized shares refer to maximum number of shares that a corporation is allowed to issue. This number is usually referenced in a company's Articles of Incorporation. The only way to increase authorized shares is to make an amendment to the aforementioned document.
There is no requirement regarding how many shares can be authorized. Enterprises use authorized shares when they go public by offering a company's equity, for instance, through an initial public offering (IPO).
If your company's articles contain authorised share capital and you wish to amend or remove the provision, the company shareholders must approve the change by passing a special resolution, which requires a majority vote of 75%. This can be done at a general meeting as well as by written resolution.
Issuing of extra shares will require a resolution to be passed by a general meeting of the company shareholders. The only way of avoiding diluting the company further by issuing shares to new investors is by existing shareholders taking up the extra shares on top of their own.
Authorized shares refer to maximum number of shares that a corporation is allowed to issue. This number is usually referenced in a company's Articles of Incorporation. The only way to increase authorized shares is to make an amendment to the aforementioned document.
The formula to calculate authorized share capital is to multiply the number of authorized shares by the par value per share. This calculation gives you the nominal capital, combining the quantity of shares a company can issue and their individual value.
The number of authorized shares is specified in the company's articles of incorporation. You can also see the number in the capital accounts section on the balance sheet.
Key Takeaways The number of shares issued must be authorized and approved by a company's board of directors (BofD).