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Simple English definitions for legal terms
authorized stock
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A quick definition of authorized stock:
Authorized stock refers to the total number of shares of stock that a corporation is allowed to issue under its charter or articles of incorporation, including both common stock and preferred stock. This means that the company has permission to sell a certain amount of shares to investors in order to raise capital. Shareholders who own authorized stock have the right to participate in the company's general management and to share in its net profits or earnings.A more thorough explanation:
Authorized stock refers to the maximum number of shares of stock that a corporation is allowed to issue according to its charter or articles of incorporation. This includes both common stock and preferred stock.
For example, if a corporation's charter authorizes the issuance of 1,000,000 shares of stock, but only 500,000 shares have been issued and are outstanding, then the corporation still has 500,000 shares of authorized stock that it can issue in the future.
Authorized stock is important because it sets a limit on how much capital a corporation can raise through the sale of its shares. It also helps to protect investors by ensuring that the corporation does not issue more shares than it is authorized to, which could dilute the value of existing shares.