authorized capital

Quick Reference

The total value of the shares that a registered company is authorized to issue in order to raise capital. The authorized capital of a company limited by shares (see limited company) must be stated in the statement of capital and initial holdings (a requirement for registration of a company), as must the number and nominal value of the shares (Companies Act 2006 s 10). For example, an authorized capital of £120,000 may be divided into 120 000 shares of £1 (the nominal value) each. If the company has issued 100 000 of these shares, it is said to have an issued capital of £100,000 and retains the ability, without an increase in capital (see alteration of share capital), to issue further shares in future. If the company has received the full nominal value of the shares issued, its paid-up capital equals its issued capital. Where a company has not yet called for payment (see call) of the full nominal value, it has uncalled capital. Reserve capital is that part of the uncalled capital that the company has determined (by special resolution) shall not be called up except upon a winding-up. A public company must have authorized share capital of at least £50,000 or the prescribed euro equivalent (Companies Act 2006 s 763).

Subjects: Law.

Reference entries