Issued vs. authorized shares
Also: authorized capital, issued capital, outstanding shares, treasury shares.
| Authorized | Maximum number permitted by the articles of incorporation |
|---|---|
| Issued | Shares the corporation has actually sold or granted |
| Outstanding | Issued shares currently held by shareholders (issued minus treasury) |
| Treasury | Shares the corporation has reacquired and holds itself |
The four categories
The distinctions matter because they answer different questions:
- Authorized. The ceiling. Set in the articles of incorporation; can only be changed by amending the articles. Answers: how many more shares can the board issue without going back to the shareholders?
- Issued. The cumulative count of shares the corporation has ever issued. Answers: how many shares have come into existence?
- Outstanding. Issued minus treasury. Answers: how many shares are currently held by shareholders and entitled to vote and receive dividends?
- Treasury. Shares the corporation has reacquired. Don't vote, don't receive dividends, but aren't cancelled and can be reissued. Answers: how much capital flexibility does the corporation hold?
Why the ceiling matters
The authorized share count is one of the most frequently revisited provisions in the articles of incorporation. Common reasons to amend:
- Series A. Create a new class of preferred shares, and expand the common pool to accommodate the post-money option pool top-up.
- Splits and consolidations. A 10-for-1 stock split increases both authorized and issued shares tenfold.
- New classes. Adding a Class B for super-voting founder shares, or a new preferred for a later round.
- Option pool expansion. Increasing the common authorized so that the option pool can grow.
A board that issues shares beyond the authorized count is taking action without authority. The resulting issuances may need to be voided or ratified, which is one of the more painful corrective actions in private corporate practice.
Implications for the cap table
The cap table typically shows outstanding and fully diluted shares, not authorized. But the gap between authorized and outstanding sets the runway for future issuances. A corporation with 100,000 authorized common and 95,000 outstanding has very little headroom for option grants or new issuances. Most corporations keep authorized substantially larger than outstanding for flexibility.
Octelligence tracks all four categories per share class. When you try to issue more than the authorized count, the system stops you and prompts an articles amendment. Treasury reissuances flow through the same workflow as new issuances, so the share register always agrees with the cap table.
See Cap Tables & FinancingLive share counts per class, articles amendment prompts, and a cap table that always agrees.