How Do You Spell AUTHORIZED SHARES?
Pronunciation: [ˈɔːθəɹˌa͡ɪzd ʃˈe͡əz] (IPA) 
Pronunciation: [ˈɔːθəɹˌa͡ɪzd ʃˈe͡əz] (IPA)
Authorized shares refer to the maximum number of shares that a corporation is legally permitted to issue or offer to potential shareholders. These shares are specified in the corporation's articles of incorporation or a similar legal document and are approved by the company's board of directors and shareholders. The authorized shares represent the upper limit of ownership interests that a corporation can issue without obtaining further approval from its shareholders.
This figure is established during the incorporation process and can be adjusted by obtaining shareholder approval. The authorized shares generally encompass both issued shares (those already sold or allocated to shareholders) and unissued shares (those available for issuance in the future).
By setting a maximum number of authorized shares, corporations maintain control over the issuance of new stock and manage their capital structure. This allows companies to issue more shares in the future if additional funding is needed, whether for expansion, acquisitions, or other business purposes. However, the issuance of authorized shares does not guarantee that all of these shares will be issued or sold.
External investors, such as potential shareholders or regulators, may analyze the number of authorized shares to evaluate a company's growth potential and dilution risk. The authorized shares are an essential aspect of a corporation's overall capital structure and play a crucial role in determining ownership and control of the company.
The word "authorized shares" does not have a specific etymology as it is a term commonly used in the field of finance and corporate law. However, it can be broken down to understand its meaning:
- "Authorized" refers to something that has been approved or permitted, often granted by a governing body or authority.
- "Shares" refers to the units of ownership in a corporation. When a company is formed, it is divided into shares, which are typically owned by shareholders.
So, "authorized shares" essentially refers to the maximum number of shares that a corporation is allowed to issue or sell, as determined and approved by the company's governing documents or authorities.
