Every company is exposed to risks and losses that can affect its financial stability and equity, and remember that one of the legal causes of the dissolution and liquidation of a company is the decline of its assets below the threshold established by law, and this can be avoided if the company has built up sufficient reserves to cover these capital declines. If this reserve reaches this fifty percent, the company is not obliged to continue to transfer ten percent of the net profit to this account. If, however, it decreases, it must reuse the same ten per cent of these profits until the reserve reaches the fixed limit again. The law does not distinguish between the type or category of companies, so that whatever it is, by the mere fact that it is foreign, it must constitute the legal reserve under Article 452 of the Commercial Code. For example, if the share capital of the corporation is $100,000,000 and the legal reserve has accumulated $70,000,000, it means that the corporation has a legal reserve $20,000,000 higher than required by law, so you can take that $20,000,000 and give it the use intended by the meeting. `Public limited companies shall constitute a legal reserve of at least fifty%. of the subscribed capital, which corresponds to ten per cent of the net profit for each financial year. Assuming a net income of $5,000,000, the legal reserve use in this case would be ($5,000,000 – income tax) x 10%. It can be said that according to Articles 452 and 453 of the Commercial Code, the only reserve required to constitute a company is the legal reserve. because the main purpose is to hedge the obligations that the company can acquire in the event of losses; This reserve guarantees a possible rescue of the company in the years when the losses are not made, but the losses.
The legal reserve will no longer be mandatory when the 100% is introduced, as in the legal reserve. In Colombia, some business companies, such as corporations, are required by law to set up a reserve to protect the company`s assets in the event of losses. Adjustment of asset reserves on the basis of the UFV sec. Details At the time of incorporation of the company or subsequently by resolution of the shareholders` meeting, a statutory reserve may be established for such purposes as shareholders deem appropriate. The legal reserve covers losses if there are no other reserves for this purpose; The legal reserve is mandatory in joint-stock companies in accordance with 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 creation of the legal reserve is optional for the partners. On the other hand, there are the legal reserves, as their name suggests, are those indicated in the articles of association of the company; Unlike the legal reserve, the rules of this type of reservation are indicated by the partners, such as the amount and destination of the same, moreover, they are no longer mandatory in the following cases: Art. 170.- (VIOLATION OF THE CONSTITUTION OF RESERVATIONS). The directors, directors and trustees are jointly and severally liable for non-compliance with the provisions of the first part of the preceding article and, where applicable, are obliged to provide the company with an amount equal to the unconstituted reserve, which may repeat against the partners the amount unduly distributed. Indeed, it is not possible to charge more than what is required by law, and the law only requires a reserve of up to 50% of the share capital. It should be noted that the minimum amount of the legal reserve is 50% of the subscribed capital, since the company has the authorized, subscribed and paid-up capital. The purpose of the reserve is to protect the assets of the company, so it cannot be used other than in this eventuality or eventuality. Since the profit for the year is creditable, it is debited when the funds are withdrawn in order to transfer them to the reserve account, which is also creditable.
Companies of any kind may also agree to the establishment of appropriate and prudent special reserves in accordance with prudent management. The percentage, limit and destination are agreed by the partners or by shareholders` meetings. Finally, there are occasional reservations which should not be provided for in the statutes, but if they can be ordered by the meeting, in this case they are binding for the year in which they are issued; The purpose of such reservations may be determined by the assembly itself, which may even modify the purpose for which they were fixed; In fact, the assembly can distribute them among the members even if their formation was not necessary. is correct or can be used to establish the legal reserve of accumulated results, i.e. Art. 169.- (LEGAL RESERVE). In the case of joint-stock companies, a reserve of at least five per cent of the actual and liquid profit generated must be established, up to half of the paid-up capital, unless otherwise provided by special laws. The reserve must be built up with the profits made before its distribution, if it has decreased for any reason. (Art. 347 HGB). In addition to the statutory reserve, there are statutory reserves that the company has taken into account in its articles of association or articles of association. If the company does not generate profits in a year or year, it is not obliged to allocate funds to the legal reserve, because this legally required 10% is attributable to liquid profits and these cannot exist in case of losses.
Each year, this exercise is carried out until the legal minimum of the reserve is reached, and now the company is free to continue to allocate funds or not to use them or to use less than 10% if it wishes. In a society, there may be different types of reserves that may coexist and have a different purpose; On the one hand, the Commercial Code refers to the legal reserve, which is nothing more than the company`s obligation to retain ten percent of the profit of each financial year up to fifty percent of the subscribed capital, in which case it will not be necessary to deduct further from the said ten percent. “Foreign companies with permanent activities in Colombia shall constitute the reserves and regulations required by the law of national public limited companies and must comply with other requirements established for their control and supervision.” It should be noted that the law only requires that the reserve be created up to the equivalent of 50% of the share capital, then, once the amount is reached, it is no longer mandatory to continue the creation of reserves, and if this minimum amount is exceeded, the company can freely dispose of this surplus.