Reserva legal sociedad limitada
legal reserve in companies
Outside of this obligation by Law, a company could contribute more than 10% to this type of Reserve, in addition, the General Meeting can agree the constitution of other types of Reserves at the time of preparing the Annual Accounts, since it will decide how to distribute the company’s results.
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what is a legal representative?
It is clear that the purpose of the incorporation of a corporation or limited liability company is to obtain profits for the shareholders, although the Consolidated Text of the Corporations Law establishes a series of limitations when it comes to distributing these profits among the shareholders.
In the year-end closing processes, the accounting profit for the year is calculated and this will appear as a balance in the Profit and Loss account. Let us remember that if the balance is a credit or debit, we will have had a profit or loss, respectively.
On the other hand, if there has been a profit for the period, we are obliged to make a proposal for its distribution, which will appear in section 3 of the Notes to the Financial Statements. This proposal will be accounted for in the following period, once it has been approved by the General Shareholders’ Meeting.
From an economic point of view, it is obvious that if there have been losses in previous years (these will be recorded in the account «Negative results of previous years»), what has occurred is a decapitalization or reduction of the company’s resources, and if profits have now been obtained, they will have to be used to recover a more balanced equity situation. Articles 123 and 260 of the TRLSA are expressed in this sense.
The reduction of capital is one of the most important modifications to a company’s bylaws. Any capital reduction is the opposite of a capital increase and may involve a reduction in the company’s equity or be a purely accounting operation.
The second case has no difficulty whatsoever and is logical: if the losses have caused the company’s equity to fall below the figure, an adequate balance must be achieved, so that capital and equity are equal.
It was not possible before to carry out a reduction of the capital of a limited liability company through the procedure of reducing the nominal value of the shares into which it is divided and with the purpose of endowing the voluntary reserves without carrying out a restitution of contributions to the partners and without adopting any measure to protect the rights of the creditors.
Thus, the Resolution of the DGRN of May 24, 2003 [j 2] which recognized that the enumeration of art. 79 LSRL. was not exhaustive, without resolving whether a reduction such as the one indicated would be possible, adopting any of the other guarantees provided by the legislator in favor of the creditors, especially if there is a statutory provision for a right of opposition. A reference to the possibility of reducing the capital by increasing the reserves was made, in a case of capital redenomination, in the Resolution of July 15, 2002, of the General Directorate of Registries and Notaries. [j 3]
Among the types of reduction mentioned in art. 317 of the LSC is the reduction for the purpose of restoring the balance between the capital and the net worth of the company diminished as a result of losses. Origin
It will be an obligation when we are in the case of art. 363.letter e of the LSC, (previously article 104.e of the Law of Limited Liability Companies); this article has been modified by Law 25/2011, of August 1 – in force on October 2, 2011 – which imposes the dissolution of the limited liability company when the losses leave the net assets reduced to an amount less than half of the share capital, unless this is increased or reduced to a sufficient extent, and provided that it is not appropriate to request the declaration of insolvency.
In this reduction to balance the equity, the Law does not generally impose (unlike the case of capital reduction by means of the system of the return of contributions to the partners) the joint and several liability of the partner, nor is there a right of opposition of the creditors, and this although in a certain way the situation affects them: it should be considered that if the capital is not balanced, the future profits should first be used to compensate the losses; the exception, which will be mentioned later, is when voluntary reserves are created without further ado.