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Trading and Investment Terminology

Authorized Share Capital

Authorized share capital—also known as "authorized stock," "authorized shares," or "authorized capital stock" 

 

It refers to the maximum number of shares a company is legally allowed to issue or offer based on its corporate charter.

 

  1. It is the maximum amount of the capital for which shares can be issued by the Company to shareholders.
  2. The Authorised capital is mentioned in the Memorandum of Association of the Company under the heading of “Capital Clause”. It is even decided prior to the incorporation of the Company.
  3. The Authorised capital can be increased at any time in the future by following necessary steps as required by law.

For Example:

                   Suppose a firm has an authorized capital of Rs 50,00,000, then it can issue shares worth up to Rs 50,00,000 to its shareholders and cannot issue anything beyond it. But however, if the company issued shares worth up to Rs 25,00,000 only, then the remaining capital amount will be held as an unused capital and can be used anytime by the firm in the future.

 

 

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