In addition to the legal reserve, there are legal reserves that are those that the company has taken into account in its statutes or statutes. The liquid profit mentioned in this document is the profit determined in accounting, which is significantly different from the tax profit or liquid income of the company. Every year, this exercise is carried out until the legal minimum of the reserve is reached, and from now on the company is free to continue to appropriate or not to acquire or acquire less than 10% if it prefers. Reserves are part of a company`s resources and are intended to meet future obligations that may arise towards third parties. In this context, these reserves may be mandatory, statutory or occasional. With regard to minimum reserves, these include liquid profit values aimed at complying with the legal requirements for the protection of the company`s assets. What happens if the legal reserve is not sufficient to absolve the losses? The legal reserve is mandatory, provided that the company has profits on which it can determine the reservation. These reservations are also not mandatory and do not affect legal reserves or legal reserves, so they must be calculated according to the reduction of the previous two if there is room for them. The legal reserve covers losses if there are no other reserves for this purpose; The legal obligation to make reservations is mandatory in public limited companies under the provisions of Article 452 of the Commercial Code, a situation that is not based on the simplified joint-stock company, since in this type of company, the constitution of the legal reserve for shareholders is optional. The legal reserve is a sum of money that companies must keep for the profits they make during a period, this fund is intended to protect the assets of the company in case of losses, the reserve can be useful if the capital is reduced for this reason until the reason for the dissolution is reached, it can also serve as a guarantee against obligations, which arise for the benefit of third parties.
In the event that this 50% is reached, the Company is not obliged to proceed with the above allocation of funds, but if the reserve is less than 50% of the subscribed capital, the Company must reallocate this percentage in order to comply with the amount required by law. In the case of limited liability companies, it may be more than 50% if specified in the articles of association. When are legal reserves no longer mandatory? Reservations can be legal, legal or occasional: the meaning of this reservation lies in the fact that losses will be borne with it, if there is no other reservation to this effect, so it is understood that it can not be used for other purposes. These, which are exhaustively created and required by law, are not subject to the will of the partners, so they cannot be capitalized or distributed. Before knowing the legal reserve in detail, it is necessary to know that there are other types of reservations that companies can make according to their needs. If the company does not make a profit in a year or year, has no obligation to provide resources for the legal reserve, because 10% is required by law, on liquid profits, and these can not exist if there are losses. If this reserve reaches the fifty percent mentioned above, the company is not obligated to continue to transfer ten percent of the liquid profits to this account. But if it decreases, it will reuse the same ten percent of those profits until the reserve reaches the fixed limit again. Simplified joint-stock companies are not required to set up a statutory reserve, although they can do so if they wish by specifying it in their articles of association according to the percentage agreed by the general meeting. The legal obligation to make a reservation in the public limited company is provided for in Article 452 of the Commercial Code: Which companies are required to create and provide the legal obligation to make reservations? Reserves are the means of the profits made by the Company to meet legal, statutory or occasional requirements.
“Losses are covered by the specific reserves and, failing that, by the legal reserve. Reserves intended to amortize certain losses may be used to cover other losses only if the meeting so decides. Although the distribution of profits is an essential element of the articles of association, shareholders can waive this right so that the general meeting of shareholders can use 100% of the profits for the constitution of reserves. In this case, however, the following elements are required: (i) the approval of a majority of shareholders representing at least 78% of the shares represented at the meeting, unless a higher decision-making majority is entered in the articles of association, and (ii) the total amount of statutory, statutory and occasional reserves does not exceed 100% of the subscribed capital. 1 Since the net income for the year is credited, it is debited when the funds are withdrawn and debited from the reserve account, which is also linked to the credit. “Foreign companies with permanent operations in Colombia constitute the reserves and regulations required by law for national companies and meet other requirements established for their control and supervision.” The legal reserve is a form of compulsory savings for commercial companies established by law. This saving consists of the partial withholding of the profit made by the company, the purpose of which is to increase the company`s assets. The company may cease to absorb resources to provide the legal reserves if there is a legal reform that eliminates them or if the amount set out in the articles is reached. Although the origin of the profits is voluntary and is part of the legal reserve, they are part of the irremovability that the law has implemented in this case. Therefore, partners can only increase it. Let us answer the following question: is it mandatory to decree the legal reserve in a company? According to Article 456 of the Commercial Code, if the legal reserve is insufficient to cover the capital deficit, the profits of the following years must be used for this purpose, so that only after covering all the losses is there room for the distribution of profits.
In this example, the legal reserve for the period is $46,900, which must be added to the cumulation of previous years, assuming that the subscribed capital of the corporation is $1,500,000 and that the balance of this reserve is $720,000, if we add the value of the statutory reserve for that period, the amount would be $766,900. of which $16,900 may or may not be added, since the minimum amount of 50% of the subscribed capital would already be reached. Every company is exposed to risks and losses that can jeopardize its financial stability and assets, and remember that one of the legal bases for the dissolution and liquidation of a company is the reduction of its assets below the threshold set by law, which can be avoided if the company has built up sufficient reserves that can cover these capital reductions. We start with the legal reserve in the corporation because it is the one that is best regulated, and the legal reserve in other types of corporations usually refers to the rules of the corporation. The legal reserve is calculated on the basis of the liquid profits of the year, understood as the net profit after taxes, and of course that after deduction or reduction of all costs and expenses of the normal year of the company The above, since it is not possible to charge more than what the law has required, and the law only requires, constitute a reserve of up to 50% of the share capital. The legal or compulsory reservation, as its name suggests, is mandatory for joint-stock companies, foreign companies and limited partnerships by shares, which are in all cases governed by Article 452 of the Commercial Code, which complies with the regulations of companies. The law only requires that the reserve be constituted up to the equivalent of 50% of the share capital, once the amount is closed, it will no longer be mandatory to continue to build up reserves, and if this minimum amount has been exceeded, the company can freely dispose of this surplus.