Authorised capital
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The authorized capital of a company (sometimes referred to as the authorized share capital, registered capital or nominal capital, particularly in the United States) is the maximum amount of share capital that the company is authorized by its constitutional documents to issue (allocate) to shareholders. Part of the authorized capital can (and frequently does) remain unissued. The authorized capital can be changed with shareholders' approval. The part of the authorized capital which has been issued to shareholders is referred to as the issued share capital of the company.
The device of the authorized capital is used to limit or control the ability of the directors to issue or allot new shares, which may have consequences in the control of a company or otherwise alter the balance of control between shareholders. Such an issue of shares to new shareholders may also shift the profit distribution balance, for example if new shares are issued at face value and not at market value.
The requirement for a company to have a set authorized capital was abolished in Australia in 2001, and in the United Kingdom, it was abolished under the Companies Act 2006.[1]
See also
- Issued shares
- Share capital
External links
- Investorwords.com
- Investopedia.com
References
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