The company must present the annual accounts for each period to the next general meeting in order to approve them and, therefore, in accordance with the draft distribution of profits, authorize, in addition to other means decided by this body, the use of the respective legal reserve and the profits to be distributed among the shareholders (a procedure similar to that of “public limited” companies). At that time, the approved distribution proposal shall be recorded by the celebration of that decision by the competent authority. This data set corresponds to a reclassification of the equity item in which the net profit at the end of the previous period was recorded by the items, in this case the legal reserve to be constituted, and the other items that the company decided to distribute, i.e. other types of reserves, cumulative profits or dividends to shareholders. Since Law 1258 of 2008 does not contain any provision on the formation of a legal reserve in the SAS, it must be designated as indicated in Article 45 and refer to the provisions of the statutes of the institution; If these provide that the Company forms the legal reserve in accordance with the conditions specified in the Commercial Code, this provision is mandatory and the appropriate procedures for its settlement and recording in the financial information must be carried out. In addition, unless required by law, he is not obliged to charge them. We then have, taking into account your two concerns, that, regardless of the date of issue of concept 220-113868 by this body, if it has not been agreed in the articles of association, the aforementioned reserve, the highest legal person of the company, gathered in accordance with the relevant legal and statutory provisions, can distribute it to shareholders without there being any deadline for this. `The statutes of the simplified public limited company shall freely determine the organisational structure of the company and the other operating rules. In the absence of a legal provision, all the functions provided for in Article 420 of the Commercial Code are deemed to be exercised by the general meeting or the sole shareholder and that the administrative functions are the responsibility of the legal representative. What happens if the legal reserve is not sufficient to compensate for losses? The company may set a different majority, but it is assumed that in such a case it must be higher than the legal minimum of 50 + 1. The articles of association may specify the functions that the legal representative will exercise, but if this is not the case, the provisions of Article 26 of Law 1258 apply: can 100% of the profits be used to build up occasional reserves and not distribute profits to shareholders? The legal reserve is constituted only if the partners determine it in the articles of association of the company and the amount and its determination are determined by the same articles of association. 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 the profits are distributed only after all losses have been covered. The occasional reserve may be created by the company whenever it deems it necessary or appropriate and has a special purpose to be approved by the general meeting of shareholders.
According to the above, the percentage of the legal reserve must be clearly determined by law, for which he can accept the provisions of Article 452 of the Commercial Code and set as a percentage of use 10% of the liquid profit. If profit-sharing is an essential element of the articles of association, shareholders can waive this right, allowing the general meeting of shareholders to use 100% of the profit to build up reserves. In this case, however, it is required: (i) the approval of a majority of shareholders representing at least 78% of the shares represented at the meeting, unless a greater majority is specified in the articles of association, and (ii) that the total amount of legal, statutory and occasional reserves does not exceed 100% of the subscribed capital. 1 In that regard, it should be noted that, since the adoption of Law No 2. 1258 of 2008, which created the so-called simplified joint-stock company, made various declarations on the so-called legal reserve and considered that S.A.S. It is not obliged to agree on the above-mentioned reservation in its statutes. If the company had foreseen that it would apply the use of a legal reserve, nothing would prevent it from amending its articles of association, complying with the relevant requirements of this procedure and “abolishing” this legal provision, so that the SAS and the general meeting can no longer necessarily dispose of the previously created reserve according to the needs of the company. which this institution shall take into account. According to the order of transfers contained in Article 45 of Law 1258 of 2008, the constitution of the legal reserve in an SAS would not be mandatory if it is not specified in the statutes of the institution.