This post is based on a conversation I had with a foreign client recently. Q. Must a corporation issue all authorized shares?
A. No, a corporate may, but it does not need to, issue all authorized shares.
Foreign Parent Audit
This question arose because my foreign client was being audited. The auditors thought that they had uncovered a problem.
In my client’s home country, the equivalent of a corporation must issue all authorized shares. As a result, the auditors – thus my client’s CFO – assumed there was a problem because the client’s US subsidiary did not issue all authorized shares.
No Need to Issue All Authorized Shares in US
I explained that the US is different. A US corporation may, but it does not need to, issue all authorized shares.
Indeed, it is quite common to issue fewer shares than are authorized. For example, founders might issue a majority of shares to themselves, but leave some authorized shares for later issuance to board members, advisors, employees and independent contractors.
- Can a Corporation Issue More Shares than are Authorized?
- How Many Shares Should My Corporation Authorize and Issue?
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.