authorized capital
MediumFormal, Technical, Legal, Financial
Definition
Meaning
The maximum amount of capital that a company is legally permitted to raise from shareholders by issuing shares, as stated in its constitutional documents.
In corporate finance, this is the ceiling value of share capital the company can issue without altering its memorandum of association (UK) or articles of incorporation (US). It is not the capital the company currently has, but its potential capacity.
Linguistics
Semantic Notes
This is a legal and accounting term, not an operational finance term. It contrasts with 'issued capital' (shares actually sold) and 'paid-up capital' (money actually received).
Dialectal Variation
British vs American Usage
Differences
The term is used in both varieties. The UK and some Commonwealth countries also use the term 'nominal capital' interchangeably. In the US, 'authorized capital stock' is a common variant.
Connotations
Identical legal and financial connotations in both regions. The concept is fundamental to company law.
Frequency
Slightly more common in UK legal/accounting texts. In US corporate contexts, 'authorized shares' or 'authorized share capital' are frequent alternatives.
Vocabulary
Collocations
Grammar
Valency Patterns
The company has an authorized capital of [amount].The authorized capital is stated in the [document].[Entity] increased its authorized capital to [amount].Vocabulary
Synonyms
Strong
Neutral
Weak
Vocabulary
Antonyms
Phrases
Idioms & Phrases
- “[None directly associated with this technical term]”
Usage
Context Usage
Business
Used in board meetings, annual reports, and investment analyses to discuss a company's fundraising potential.
Academic
Featured in textbooks on corporate law, finance, and corporate governance.
Everyday
Virtually never used in casual conversation.
Technical
A precise term in legal incorporation documents, accounting standards, and regulatory filings.
Examples
By Part of Speech
verb
British English
- The directors resolved to authorise a new share issue within the existing authorised capital.
American English
- The board voted to authorize an increase in the company's authorized capital.
adverb
British English
- [The term is not used as an adverb.]
American English
- [The term is not used as an adverb.]
adjective
British English
- The authorised capital clause is a key part of the memorandum.
American English
- The authorized capital amount was listed on the certificate of incorporation.
Examples
By CEFR Level
- [Level too low for this technical term. Use placeholder.]
- The word 'capital' can mean money for a business.
- The company's authorized capital is £1 million.
- They cannot sell more shares than their authorized capital allows.
- Startups often set a high authorized capital to avoid the cost and hassle of increasing it later via shareholder vote.
- The gap between the authorized capital and the issued capital represents the company's potential to raise further equity.
- A resolution to amend the articles of association to increase the authorized capital requires a special majority of shareholders.
- Analysts noted the firm's substantial unissued authorized capital, which provided significant financial headroom for strategic acquisitions.
Learning
Memory Aids
Mnemonic
Think of a 'credit limit' on a card. 'Authorized capital' is the company's legal 'share-issuing limit' set at its creation.
Conceptual Metaphor
A CONTAINER: The company is a container, and the authorized capital is its maximum legal capacity for shareholder equity.
Watch out
Common Pitfalls
Translation Traps (for Russian speakers)
- Do not confuse with 'уставный капитал', which typically refers to the *minimum* initial capital required for registration, not the maximum allowed. 'Authorized capital' is closer to 'объявленный уставный капитал' or 'разрешенный капитал'.
Common Mistakes
- Using it to mean the money the company currently has.
- Confusing it with market capitalization.
- Pronouncing 'authorized' as /ɔːˈθɒrɪzd/ instead of /ˈɔːθəraɪzd/.
Practice
Quiz
What does 'authorized capital' primarily refer to?
FAQ
Frequently Asked Questions
No. It is a legal permission to issue shares up to a certain value, not actual cash. The money is only received when shares are issued and paid for.
Yes, but it typically requires a formal vote by shareholders to amend the company's constitutional documents, followed by regulatory filing.
Authorized capital is the maximum allowed. Issued capital is the portion of that maximum that has actually been allotted to shareholders.
To retain flexibility for future fundraising (e.g., for expansion, acquisitions, or emergencies) without needing immediate shareholder approval to increase the limit.