ANSWER: In the case of limited liability companies, as in the case of capital companies, Article 16 of Law No. 6380 must be taken into account, which stipulates that annual profits intended for the capital increase or reserve are not deductible. This means that reserves can be built up and/or capitalized after the tax is determined. For the calculation of the legal reserve in accordance with Article 70 of Law No. 19.550, an amount of at least five percent (5%) of the annual result plus or minus the adjustments of previous years and after deduction of accumulated losses©, if any, must be deducted until TWENTY PERCENT is reached. Since the profit for the year is creditable, it is debited when the funds are withdrawn in order to transfer them to the reserve account, which is also creditable. The legal reserve is no longer mandatory if the 100% introduced at 100% is met, as in the legal reserve HOW IT IS CALCULATED: To calculate the legal reserve of commercial companies, the annual profit minus the annual tax must 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. For certain types of companies, such as limited liability companies and shares, the law imposes an obligation not to distribute a certain proportion of profits. This reserve is the legal reserve, established in Article 91 of Law 1.034/83 of the trader, which obliges to distribute 5% of the net profit of the year only when twenty percent of the subscribed capital is reached. `Public limited companies shall constitute a legal reserve of at least fifty%. of the subscribed capital, which shall consist of ten per cent of the profit for the financial year. Foreign companies with permanent activities in Colombia constitute the reserves and regulations required by law for national public limited companies and must comply with other requirements established for their control and supervision. “Application of anonymous rules on legal reserves, balance sheets and profit-sharing. The company constitutes a legal reserve, subject to the rules on anonymous public access.
The same rules apply to annual balance sheets and profit-sharing. 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. 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. Other types of reservations are optional in the statutes in the case of statutory reserves or general meetings and in the case of occasional reservations. As mentioned above, having a loss or negative result does not necessarily imply the obligation to offset it, but in the case of sufficient voluntary or optional reserves to compensate for the loss for the period, it would be strongly advised to proceed with compensation (to cover losses) and to clean up equity from the proven negative result. `The limited partnership shall constitute a legal reserve of at least fifty per cent of the subscribed capital, consisting of ten per cent of the net profit for each financial year. If it reaches this limit or the limit provided for in the articles, whichever is higher, the company is not obliged to increase it further, but if it decreases, it will reuse the same ten percent of these profits until the reserve reaches the fixed amount again. The legal reserve in the capital company is provided for in Article 452 of the Commercial Code: the legal reserve is a type of fund or savings that companies or companies are legally required to create in order to protect inheritance. Assuming a net profit of $5,000,000, the intended use for the legal reserve in this case would be ($5,000,000 – income tax) x 10% The obligation to create a legal reserve is provided for by the Commercial Code and applies to the following companies: In Colombia, certain commercial companies, such as companies, are required by law to set up a reserve to store the company`s assets in the event of losses. protect. 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 company may take this surplus and establish or increase a statutory or occasional reserve or distribute it as a dividend to shareholders. If the legal reserve is insufficient to cover the capital shortfall, social benefits from subsequent years shall be used for this purpose.” 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.
Companies that are not legally required to set up a legal reserve may be taken into account in the articles of association. With the end of the financial year and the approval of the balance sheet and the profit and loss account, doubts begin about the situations that may arise in relation to the annual result. One of them is the possibility of offsetting losses incurred during the year by voluntary or optional reserves. We will briefly discuss this possibility. 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. In summary, it is possible to offset the losses of the year with voluntary reserves, and it is advisable to do so in order to project a better picture of the company`s assets, since this is the appropriate time to make the compensation before the end of the year. 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. We have already analyzed the reserves and the negative result or loss of the year, now we must analyze the possibility of offsetting them with possible negative results. 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.