Authorized shares

Authorized shares are the total number of shares that a corporation is legally allowed to issue, as stated in its articles of incorporation. The number of outstanding shares cannot exceed the number of authorized shares. When a company needs to sell additional shares, it can have the current shareholders approve an increase in the number of authorized shares. It is generally a good idea to maintain a large buffer between the number of authorized shares and outstanding shares, so that management is able to issue additional shares on short notice. For example, this allows a company to issue shares to acquire another business.