Authorized Capital

Also known as authorized shares or authorized capital stock. The maximum number of shares of capital stock that a corporation may legally issue under its certificate of incorporation. The number of authorized shares should be sufficiently high to permit future issuances of shares (for example, to employees or in acquisitions). If the number of authorized shares needs to be increased at a later date, approval of the board of directors and stockholders is required. In some states (such as Delaware), the annual franchise tax is generally calculated using the number of authorized shares. For an example of an authorized capital provision, see Standard Document, Certificate of Incorporation (Short-form DE).

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