How to distribute the equity/social capital in your company

The equity capital conversation

Whenever you create a company in France, your company will have a certain amount of “social capital”, or equity. This is not only one of the main ways to fund your company, but it is also how the importance of each associate is defined.

As such, it is very important to properly distribute the social capital, so that the company can be as solid as possible.

Distributing the initial social capital

Distributing the social capital means distributing the “power” between the associates. As such, distributing it based on the financial contributions of each associate may not be such a good idea, especially when said associates will be taking an active role in the company.

Indeed, the importance of each associate, especially in small companies, depends more on their responsibilities, their activity, the importance of their activity within the company, etc.

When there’s a new investor

Generally, when a company is seeking investors, it’s because it desperately needs the cash to make some investments, or to keep the company going. As such, having a new investor can completely change the balance of power within a company.

This is why it’s important to define the conditions in which new capital is brought to the company, with an associate’s pact, for example.