A form of share capital that represents the maximum amount of share capital that an entity is legally allowed to issue to its shareholders (as defined in its constitutional documents: memorandum of association or articles of incorporation). It is a cap on the number of shares that an entity can issue after constitution. When embarking on an initial public offering (IPO) or other offering of stock, an entity typically won’t issue its authorized capital in full.

An entity may prefer to leave room to issue additional stock, and raise more capital, in the future when more capital is needed. In specific situations, entities also do not issue all their authorized stock in order to retain a controlling interest in the business.

It is also known as an authorized share capital, a registered capital or a nominal capital.