According to Christina Pretorius, Associate at Norton Rose, authorised shares are all of the shares that have been created in a company.
Once the shares are issued to shareholders, they become issued shares. Therefore, in order to be validly issued, the shares must first have been created, or authorised.
The number of authorised shares is set out in a company’s memorandum of incorporation.
In order to register a company, at least one share must be issued. Usually a start-up business would acquire a shelf company, which already has at least one share in issue. The share is then sold, or transferred, to the new owner.
In order to issue authorised shares, the board of directors of the company must pass a resolution to that effect. The new shareholder is then entered into the company’s register of members, and the company creates a share certificate evidencing the issue, and gives it to the new shareholder.
The issue must also be entered into a separate register. A company’s memorandum of incorporation may set out additional requirements for the issue of shares.