Authorised shares are the number of shares in total which a company is permitted to have in issue, details of which are contained in the memorandum and articles of association.
The term authorised share capital is the total nominal value of of its equity which a company is allowed to have in issue at any one time.
This is distinct and separate from a company's issued share capital which is the nominal amount of the total authorised shares that has actually issued.
When registering a new company, it is a requirement to state both the number and nominal value of authorised shares. For most new companies the values that are chosen are 1000 with a nominal value of £1 each.
If the company later finds that the authorised share capital is insufficient to satisfy the number which it wishes to issue, the company can increase the number to a greater amount.
The increase must be agreed at a general meeting of the company by persons holding a majority of the voting rights.
The minutes of the general meeting which contain details of the resolution, together with a completed Form 123 must be sent to the Registrar of Companies within two weeks following the meeting at which the motion was passed.
There is no statutory limit as to how much a company can increase its authorised share capital. Most companies however will set an amount which is sufficient but not excessive to their requirements as to become unmanageable.
Occasionally and certainly not as often as increases occur, some companies might wish to decrease their number of authorised shares.
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At the inception of the Companies Act 2006 changes introduced on 1 October 2009 the concept of specifying a number for authorised shares during a company registration application has been superseded by new provisions.
These new regulations require a Statement of Capital which is primarily concerned with the amount of shares actually issued at incorporation and subsequently.
This article therefore remains for historical and reference purposes depicting the environment prior to the introduction of the new 2006 Act.
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