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Simple English definitions for legal terms
authorized capital stock
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A quick definition of authorized capital stock:
Authorized capital stock refers to the total amount of shares that a corporation is allowed to issue according to its charter or articles of incorporation. This includes both common and preferred stock. The owners of a majority of outstanding shares can increase the amount of authorized capital stock. Common stock entitles the holder to vote on corporate matters, receive dividends after other claims and dividends have been paid, and share in assets upon liquidation. Preferred stock gives its holder a preferential claim to dividends and corporate assets upon liquidation but usually carries no voting rights.A more thorough explanation:
Authorized capital stock refers to the maximum number of shares a corporation can issue to raise capital through the sale of shares. This includes both common and preferred stock. The authorized capital stock can be increased with the consent of the majority of outstanding shareholders.
For example, if a corporation has an authorized capital stock of 1,000,000 shares and has issued 500,000 shares, it can issue an additional 500,000 shares to raise more capital.
Another example is if a corporation wants to expand its operations and needs more capital, it can increase its authorized capital stock to issue more shares and raise the necessary funds.