Definition of Authorized Capital

An authorized capital or an authorized share capital is the maximum equity capital that a company is authorized to issue in order to allocate them to shareholders.

Points to remember:

• The capital that is authorized to issue is called the ‘issue share capital’ of that company.
• The authorized capital can change along with the shareholder’s consent.
• The authorized capital is usually not fully made use of by the company. This is done in order to keep some room for future issuing of additional stock in emergency situations.