Restricted and free equity: how much you can pay out

You look at the company account, see SEK 400,000 and figure a SEK 300,000 dividend should be fine. That’s the wrong place to start. How much cash is in the bank says almost nothing about how much you’re allowed to pay out. The answer sits at the bottom of the liabilities side of the balance sheet, under equity, eget kapital.

Equity comes in two compartments

A Swedish limited company must split its equity into restricted equity, bundet eget kapital, and free equity, fritt eget kapital. That requirement comes from the Annual Accounts Act. The restricted part has to stay in the company as a cushion for creditors. The free part is, in principle, the owners’ to use.

In a small company the restricted equity is almost always just the share capital, aktiekapital, usually SEK 25,000 since that’s the minimum under chapter 1, section 5 of the Companies Act. Statutory reserves, revaluation reserves and development expenditure reserves are restricted too, but they rarely show up in a one-owner consultancy. In the books, share capital normally sits on account 2081.

Free equity is retained earnings, balanserad vinst, meaning profits from earlier years you haven’t paid out, plus the result for the year. A free share premium reserve from a new share issue also counts here.

The rule that controls everything

The core is chapter 17, section 3 of the Companies Act: no distribution may be made unless the restricted equity is still fully covered afterwards. The calculation is based on the most recently adopted balance sheet. This is the amount barrier, beloppsspärren, and it’s absolute.

The same section contains the prudence rule, försiktighetsregeln. The dividend must be justifiable given the equity the business needs and the company’s liquidity, need to consolidate and overall position. This is where the bank balance matters, but only as a limit, never as the basis. Free equity can be large while the cash is gone, for example if the profit is tied up in unpaid customer invoices or a machine.

Run the numbers on your own company

Say your latest adopted balance sheet, at 31 December 2025, shows this under equity: share capital SEK 25,000, retained earnings SEK 180,000 and profit for the year SEK 120,000. Restricted equity is 25,000. Free equity is 180,000 + 120,000 = SEK 300,000.

At the AGM this spring you paid out SEK 100,000. That leaves SEK 200,000 of free equity. Bolagsverket, the Swedish Companies Registration Office, states plainly that for a dividend decided at an extra general meeting you can only distribute what remains, and earlier dividends must be deducted.

Now suppose 2026 has gone worse and the company is SEK 80,000 in the red so far this year. The amount barrier doesn’t see that loss, because it works from the adopted balance sheet. The prudence rule does. Emptying the full SEK 200,000 while the company is losing money and holds SEK 150,000 in cash would be hard to defend. A more reasonable ceiling is closer to what’s left once this year’s loss, upcoming taxes and supplier bills are covered.

Things that look like money but aren’t free

The most common mistake involves tax allocation reserves, periodiseringsfonder. They sit under untaxed reserves, not equity, so you can’t distribute them as they are. Only when a reserve is reversed does the amount become taxable profit, and what’s left after tax ends up in free equity.

You also can’t pay out this year’s running 2026 profit now in November. It isn’t adopted until the 2027 AGM approves the 2026 balance sheet. If you want that money, you wait, or you take it as salary.

If most of your equity is restricted and you want to free it up, the route is to reduce the share capital. That takes a shareholder resolution, registration with Bolagsverket and often Bolagsverket’s permission. You can’t go below SEK 25,000.

The board has to put its judgement in writing

When the board proposes a dividend, chapter 18 of the Companies Act requires a statement explaining why the proposal is justifiable. If you’re the only board member, you’re writing that statement to yourself. Do it properly anyway, with figures for cash, upcoming payments and the result so far this year. It’s your evidence if the dividend is questioned later, for instance in a bankruptcy.

An unlawful dividend must be repaid to the company, and anyone who took part in the decision can be liable for the shortfall. How the dividend is then taxed for you personally falls under the 3:12 rules, which Skatteverket, the Swedish Tax Agency, explains here, but that’s a separate question from how much the company may pay out.

Pull up the adopted 2025 balance sheet, add up retained earnings and profit for the year, and subtract whatever you’ve already paid out this year. That figure is your ceiling. Then compare it with what the cash can handle after December’s salaries and taxes, and go with the lower number.