Authorized Capital refers to the maximum amount of capital that a company is legally allowed to raise through the issuance of shares. This amount is specified in the company’s articles of incorporation and represents the total value of shares that the company is authorized to issue. It does not necessarily represent the amount of capital that has been raised or is currently available to the company. The authorized capital can be increased or decreased through a formal process of amending the company’s articles of incorporation.
Authorized capital refers to the maximum amount of capital that a company is legally allowed to issue and sell to its shareholders. It is the total value of shares that a company is authorized to issue, as stated in its articles of incorporation or other governing documents. The authorized capital is typically set at the time of incorporation and can be increased or decreased through a formal process, such as a shareholder resolution or amendment to the articles of incorporation. The authorized capital does not necessarily represent the actual amount of capital that has been issued or subscribed by shareholders, but rather serves as a limit on the company’s ability to raise funds through the issuance of shares.
Q: What is authorized capital?
A: Authorized capital is the maximum amount of capital that a company is allowed to raise through the issuance of shares.
Q: How is authorized capital determined?
A: The authorized capital is typically determined at the time of incorporation and is specified in the company’s articles of association.
Q: Can the authorized capital be changed?
A: Yes, the authorized capital can be changed through a formal process of amending the company’s articles of association, which usually requires approval from the shareholders.
Q: What is the significance of authorized capital?
A: The authorized capital sets the limit on the amount of funds that a company can raise through the issuance of shares, and it also determines the potential size of the company’s operations and growth.
Q: Is authorized capital the same as issued capital?
A: No, authorized capital is the maximum amount of capital that a company can raise, while issued capital is the actual amount of capital that has been issued to shareholders.
Q: Can a company have authorized capital without issuing any shares?
A: Yes, a company can have authorized capital without issuing any shares. The authorized capital simply represents the maximum potential for raising funds through the issuance of shares.
Q: What happens if a company exceeds its authorized capital?
A: If a company exceeds its authorized capital, it may need to go through the process of amending its articles of association to increase the authorized capital limit.
Q: How does authorized capital affect shareholders?
A: Authorized capital does not directly affect shareholders, but it does determine the potential for future dilution of their ownership stake if the company issues additional shares.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 29th March 2024.
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