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Guilherme Mazui

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What is the Difference Between Authorised and Issued Share Capital?

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The difference between authorised and issued share capital lies in the maximum number of shares a company can issue and the actual number of shares issued to shareholders.

  • Authorised Share Capital: This is the maximum number of shares that a company is permitted to issue according to its Memorandum and Articles of Association. It is the total number of shares that the company is authorised to issue to its investors, as established by the company's articles of incorporation. The authorised share capital does not have to be paid up, and there is no liability for this amount.
  • Issued Share Capital: This refers to the actual number of shares that have been issued to the members of the company. It is the value of shares held by shareholders. The issued share capital is usually lower than the authorised share capital, as a company may choose to hold onto some shares for future issues or for other strategic reasons.

In summary:

  • Authorised share capital represents the maximum number of shares a company can issue.
  • Issued share capital refers to the actual number of shares issued to shareholders.
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  • What is the Difference Between Authorised and Issued Share Capital?
  • Comparative Table: Authorised vs Issued Share Capital

    • Comparative Table: Authorised vs Issued Share Capital

    The difference between authorized and issued share capital lies in their definitions and purposes. Here is a comparison table highlighting the key differences between the two:

    Comparison Criteria Authorized Share Capital Issued Share Capital
    Meaning The maximum number of shares that a company can legally issue to shareholders as stated in its memorandum of association or articles of incorporation. The number of shares given to shareholders, which is always equal to or less than the total number of authorized shares.
    Purpose Defines the maximum ceiling of share capital that can be raised by a company from the public by issuing shares. The actual shares issued or sold to investors from the available number of authorized shares.
    Flexibility Companies can choose to have 0 authorized capital, meaning they can't issue any new shares without amending the company constitution and altering authorized share capital by a resolution. Companies can issue shares at different stages based on need and demand, and a portion of shares is kept in the company's treasury to preserve controlling interest.
    Control Holders of outstanding or issued shares typically have voting rights and dividend distributions. Companies may intentionally hold back authorized shares as a defensive maneuver to reduce the possibility of a hostile takeover if a majority of shares have yet to be issued.

    In summary, authorized share capital represents the maximum number of shares that a company can issue, while issued share capital refers to the actual number of shares sold to investors. Companies have the flexibility to issue shares at different stages based on need and demand, and they may retain some authorized shares to maintain control and reduce the possibility of hostile takeovers.

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    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.