Authorized Capital

Accounting Print Email

Every company is authorized to issue and allocate some specific amount of capital shares to the share holders in that company. In other words this term is also referred to as the authorized share.

Exercise of authorized capital

This is the registered capital or in other words the nominal capital which is legalized only in United States. However with the passage of time and with increasing awareness among people and companies, the share or nominal capital is increasing day by day. Every company by law is legalized or authorized to issue a limited amount of share or amount to its share holders and stake holders. Usually the shares are allocated to the share holders according to the constitutional documents.

Conditions for authorized capital

However there are some clauses and issues related with the issuing of authorized capital. There is always some part of the authorized capital which remains unissued or unallocated. Usually the number of unissued capital amounts is required to be approved by the share holders in the company. On the other hand the issuing of authorized capital to the stake holders and share holders of the company is openly referred to as the share capital of the company. Normally the work clauses and recommendations for the issuing of authorized capital fall in this category.

Initiation of authorized capital

Basically the orders and clauses for the issuing of the authorized share capital and its related concepts were initiated in the United Kingdom in 2006. This implementation was made under the Companies Act of the year 2006. Basically it so happens that the stake holders vote for the company and its stock holders. The total numbers of the stock units which can be held and shared by the company are voted by the share holders of the specific company.

Saving the authorized capital

Sometimes it so happens that all of the share capital or authorized capital is not spent completely but some of it is saved for future use. Usually the company keeps the authorized capital saved for future because the situation arises many times when there is a need of issuing the financial stock to the share holders. The best way to keep extra share saved is to control the interest rate in the company. 

Login to ReadyRatios


Have you forgotten your password?

Are you a new user?

Login As
You can log in if you are registered at one of these services: