Authorized Capital Stock
Authorized Capital Stock (ACS) refers to the maximum amount of capital that a corporation is legally allowed to issue to its shareholders, as approved by the Securities and Exchange Commission (SEC).
In Filipino MSME terms: ito yung “pinakamataas na halaga ng shares na pwedeng ilabas ng korporasyon.”
It sets the upper limit of how much ownership (shares) the corporation can distribute.
Why Authorized Capital Stock Matters
For Filipino corporations, ACS is important because it:
- Defines ownership structure — how many shares can exist
- Sets investment capacity — how much capital the corporation can raise
- Determines SEC filing fees — higher ACS means higher fees
- Allows future expansion without amending the Articles of Incorporation
- Provides flexibility for adding new investors or issuing more shares
Many corporations set a higher ACS than what they initially need to avoid future amendments.
Components of Authorized Capital Stock
- Total Authorized Capital — the maximum value of shares
- Number of Shares — how many shares make up the ACS
- Par Value — the minimum price per share (e.g., ₱1.00/share)
- Types of Shares — common, preferred, voting, non-voting
Example / Context
Example 1 (Small Corporation):
A corporation registers with an ACS of ₱1,000,000 divided into 1,000,000 shares at ₱1.00 par value.
Example 2 (Startup):
Founders set a high ACS (e.g., ₱10 million) even if they only subscribe to ₱100,000 worth of shares initially.
Example 3 (Family Corporation):
ACS is divided among family members, with room for future investors.
Example 4 (Expanding Business):
The corporation increases ACS to issue new shares for expansion funding.
Related Terms
FAQs
1. Is authorized capital stock the same as paid-up capital?
No. Authorized capital is the maximum allowed. Paid-up capital is the actual amount paid by shareholders.
2. Can a corporation increase its authorized capital stock?
Yes, but it requires SEC approval and amendments to the Articles of Incorporation.
3. Does a higher ACS mean higher taxes?
No. ACS affects SEC fees, not taxes. Taxes depend on income and operations.
4. Do I need to fully subscribe to the entire ACS?
No. You can subscribe to only a portion. Many corporations subscribe to 25% of ACS and pay at least 25% of that subscription.