1 / The European regulatory framework relating to State aid 

The general principle is to prohibit state aid which could threaten to distort competition in the European single market.

However, there is no specific European rule directly limiting public subsidies based on companies' equity.

But there is a principle that ultimately limits the amount of your sub: competitive financing (= public/private co-financing). There are 2 main sources that delimit this principle: 

• Article 107(1 and 3) TFEU which requires that aid be necessary (= objective of common interest) and proportionate (= not exceeding what is strictly necessary to achieve that objective and not to replace existing private funding).
• The European Commission's sectoral guidelines define the maximum aid rates authorized according to the size of the company and the type of activity (between 20 and 70%). They stipulate that companies must finance the remainder of eligible costs through their own resources or private contributions.

2 / The financial stability provided by equity 

While you, the CEO, are focused on your cash flow, investors analyzing your company start by looking at your equity. 

There are 3 main reasons for this slightly strange interest:

• Equity acts as a financial cushion. In the event of losses or a drop in revenue, it allows the company to continue operating.
• A substantial amount of equity reinforces the perception of the company's reliability and resilience, encouraging investors, suppliers and customers to trust it.
• A strong equity base provides greater independence from external sources of financing, enabling more flexible management and better strategic decision-making.