---
title: "What Is Authorized Capital?"
term: "Authorized Capital"
description: "Authorized capital is the maximum amount of share capital a company is legally permitted to issue under its charter or articles of incorporation. It sets an upper bound; issued shares are what founders and investors actually own today."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/authorized-capital
---

# What Is Authorized Capital?

> Authorized capital is the maximum amount of share capital a company is legally permitted to issue under its charter or articles of incorporation. It sets an upper bound; issued shares are what founders and investors actually own today.

**Authorized capital** is the maximum share capital a corporation may issue under its certificate of incorporation or articles of association. It is a legal ceiling, not the same as shares currently held by shareholders.

## How it works

Delaware and other jurisdictions let founders incorporate with a modest authorized share count for filing fees, then increase authorization by board and stockholder vote before a priced round. A typical Series A might authorize 20–40 million common shares and several million preferred shares across classes to cover the round, option pool refresh, and future issuances.

Par value — often a fraction of a cent per share — ties to authorized capital in some jurisdictions outside the US. UK and EU companies may refer to nominal authorized capital in currency terms rather than share counts alone.

Issued and outstanding shares plus reserved option pool must fit within authorized limits. [Authorized shares](/glossary/authorized-shares) is the closely related term US lawyers use in cap table work.

## Why it matters

- **Founders:** Sign charter amendments early in a financing timeline; state filing delays can push closing dates.
- **Investors:** Confirm post-close authorization covers at least one more round without another stockholder vote if possible.
- **Operators:** Cap table software should track authorized versus issued; mismatches show up in closing checklists.

## Common mistake

Confusing authorized capital with valuation. Doubling authorized shares does not dilute anyone until new shares are actually issued to investors or the pool.

## Related ideas

[/glossary/authorized-shares](/glossary/authorized-shares), issued and outstanding, charter amendment, and par value.

## FAQ

### What is authorized capital in simple terms?

Authorized capital is the ceiling on how many shares — or how much nominal value — a company may issue under its corporate charter. Until shares are issued, authorization is just permission, not ownership.

### Why does authorized capital matter?

Running out of authorized shares blocks a financing close. Investors expect counsel to bump authorization and file amendments before signing, especially when adding option pools and new preferred classes.


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Source: https://venturecapitaltracker.com/glossary/authorized-capital