Unrestricted equity

Unrestricted equity is equity that can be freely distributed to shareholders. Unrestricted equity includes accumulated earnings from earlier years.

The capital available as unrestricted equity are allocated according to a decision at the general meeting, the decision is often based on a suggestion from the board of directors and the CEO. The shareholders at the general meeting decides on the amount of unrestricted equity that should be distributed to shareholders and the amount that will be carried forward as retained earnings.

Even if a company has a lot of unrestricted equity, it is not certain that there will be dividends. Unrestricted equity may be needed for investments in the business. Unrestricted equity includes net income and retained earnings.