The statutory reserve is a fund that companies or companies are legally required to establish. On the one hand, the mandate derives from the statutes themselves which, in their statutes, determine the use of profits and allocate the mandatory percentages for the various reserves. On the other hand, under Article 91 of Law 1034/83, each company is required to allocate a legal reserve of 5% on net profit after tax up to a maximum of 20% of the subscribed capital. The purpose of the legal reserve is to protect the share capital against possible losses. Companies cannot freely dispose of these reserves or use them for whatever they want, but their only purpose is to meet them. The legal reserve applies to capital companies, limited liability companies and simplified joint-stock companies, regardless of the nature of their activity. For financial institutions and cooperatives, the rules and rates are different. HOW IT IS CALCULATED: When calculating the legal reserve of commercial companies, the annual profit minus the annual tax should be taken as a basis. The reserve requirement ratio is 5%. The minimum amount of the statutory reserve account must be 20% of the subscribed share capital.
Once this amount is reached, there is no need to increase the fund further, that is, it will not be necessary to charge it more. If no profit is made, the legal reserve does not have to be calculated. This reservation may not contain any provision other than that established by law, which stipulates that it will be used to eliminate losses. In the event of a surplus of the legal reserve, i.e. if it exceeds 20% of the subscribed share capital, the excess amount may be freely used, even if it is distributed among the partners. QUESTIONS: I am a partner and shareholder of a joint-stock company (SA) and a limited liability company (SRL) dedicated to trading in general, I would like to know what the legal reserve is for. How is this done? Is there a legal provision in this regard and is it mandatory to have it in the assets of the company? HOW AND WHEN DO I REGISTER? Although the provisions do not exhaustively specify when these reserves are to be determined and recorded, they occur at the end of each fiscal year in which the net of tax profit is generated. The LLC that has already agreed on the established legal booking commitment can do so at the beginning of the new cycle or period as it does not have a meeting. Public limited companies, on the other hand, may do so at the time when the meeting so decides. The accounting is carried out as follows: debit of the “Annual surplus” account with credit to the “Legal reserve” account.
The legal reserve is an account with a balance that, together with the other reserves and results, forms part of the company`s assets. LEGAL RESERVE – CONCEPT – OBJECTIVE – PROVISIONS ANSWER: We are in the phase of closing the balance sheet and convening meetings and hope that this material will be useful. Profit for the year after tax Gs. 16,425,000.-.