Also known as: authorized share · authorised shares
Written by attorneys · grounded in primary & secondary sources — see below
The maximum number of shares a corporation may issue under its articles of incorporation. This ceiling appears as a mandatory item in the formation document and fixes the total pool available for initial and subsequent issuances.
Argonaut Shipping's board approves an amendment that turns each issued and unissued common share into three whole shares of the same class. After the filing, the corporation's pool of authorized shares effectively triples while each shareholder's percentage ownership stays identical. The change allows smaller blocks to be granted to new engineers without further charter amendments.
Apex Dynamics declares a share dividend to its sole class of common shareholders. The board adopts an amendment that raises the number of authorized shares by exactly the amount needed to cover the dividend distribution. No shareholder vote occurs because only one class remains outstanding.
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Atlas Ventures acquires its own shares under a charter clause that bars reissuance. The acquisition automatically lowers the total number of authorized shares by the quantity repurchased. Existing shareholders see their relative ownership percentages rise because the ceiling on issuable shares has contracted.
The articles must set forth the total number of shares the corporation is authorized to issue. This figure establishes the legal ceiling on shares that may be issued and provides public notice of the corporation's maximum equity structure.
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The articles are incomplete and the corporation lacks a defined limit on issuable shares. Any purported issuances rest on a defective authorization until the charter is amended to supply the missing figure.
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When the corporation has only one class of shares outstanding, the board may increase authorized shares to the extent necessary for a share dividend. The same authority permits reclassifying each share into a greater number of whole shares of the same class.
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Only when the articles prohibit reissuance of the acquired shares. In that case the authorized total drops by the number of shares acquired. Otherwise the shares remain authorized but unissued.
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…appeal, it is unnecessary for us to consider whether the plaintiff had any pre-emptive rights in the proposed issuance of newly authorized shares as payment for the transfer of assets from List, or whether amended sections 908C and 311F of the corporation law may constitutionally be applied to the present transaction to divest the…