The shareholders’ equity in the parent company financial statements equals the equity attributable to common shareholders presented in the consolidated financial statements, except for legal and statutory reserves. The currency translation reserve, cash flow hedging reserve, capitalized development expenditure and investees equity non-distributable reserve are legal reserves that are required by Dutch law. Furthermore on the statutory reserves, pursuant to the Company’s Articles of Association, a 'Protective Preference Shares' reserve is required to be maintained by the Company.
31 December 2022
31 December 2021
Investees equity non-distributable
Capitalized development expenditure
Cash flow hedges
The ’Investees equity non-distributable’ legal reserve relates mainly to non-distributable profits generated by the co-owned entities (refer to note 4.3.29 Investment in Associates and Joint Ventures and 4.3.30 Information on Non-controlling Interests). The agreed principle in the applicable shareholders’ agreements is that the shareholders shall procure that any available reserves are distributable after paying any expenses due and taking into account co-owned entity and applicable legal requirements. However, as unanimous decision of shareholders agreements in most of the co-owned entities is required to distribute the profits generated, the equity of these entities is classified as a non-distributable reserve under Dutch guidelines for financial reporting. On a regular basis the Company ensures that dividends are approved by the partners and distributed accordingly to the shareholders.
The legal reserve for 'investees equity non-distributable' and 'capitalized development expenditure' are formed by withdrawal from the distributable retained earnings. In the event of depreciation or impairment, the capitalized development expenditure will be reduced by adding it to the retained earnings reserves in the amount of the depreciation or impairment.
If either the currency translation reserve or the cash flow hedging reserve has a negative balance, distributions from the retained earnings cannot be made to the Company’s shareholders equivalent to the amount of that negative balance.
The Management Board, with the approval of the Supervisory Board, has granted a call option to Stichting Continuiteit SBM Offshore to acquire a number of preference shares. As of October 1, 2022 and with reference to articles 5.5 and 5.6 of the Articles of Association of the Company, a 'Protective Preference Shares' reserve amounting to US$26 million (2021: US$0 million) has been created at the expense of the share premium reserve at the level of the Company. If and when Stichting Continuiteit SBM Offshore would exercise the call option to acquire preference shares, these preference shares may also be paid-up from the reserve of the Company. In addition to the legal reserves, distributions to the Company’s shareholders are restricted to the amount of the statutory reserves.
The ‘Retained earnings’ also includes the ‘2 share-based payments’ amounting to US$21 million (2021: US$22 million). The ‘ 2 share-based payments’ granted but still unvested are non-distributable by nature.
The Company's total equity as at December 31, 2022 is US$3,397 million, out of which US$1,860 million relates to legal reserves and US$26 million relates to the statutory reserves (December 31, 2021: Total equity of US$2,579 million out of which US$1,211 million relates to legal reserves and US$0 million to the statutory reserves). For more information on the dividends on common shares, reference is made to note 4.3.12 Dividends paid and proposed.