In the context of the CSA, the notion of share capital is omitted for LLP and SC, so no legal reserve should be created. Nothing changes in the SA and the SCA: the notion of share capital is retained and the legal reserve must always be constituted according to the same rules as before. No share capital, no legal reserve? What will he replace it with in this case? These two balance sheet accounts have been replaced by the equity account, which is not legally available. As the name suggests, this capital cannot be distributed. If you still wish to do so, you must explicitly provide for this in the articles of association. In reality, you need to be careful when allocating equity (whether it comes from the equity account or earnings). Distributions are subject to a double test: the liquidity test and the balance sheet test. And it is precisely this liquidity test that has replaced the legal reserve. This test must prevent the administrator from putting the company in difficulty by distributions that jeopardize the continuation of its activities. In addition, in the event of a decline in activity, the company can offset its losses with the reserves already accumulated. For example, if a company needs to use this reserve to respond to a decline in activity, it must withdraw 5% of its profits until it reaches 10% of the new capital.

If the company made a profit in the previous financial year, 5% of these profits must be allocated to the legal reserve, unless the amounts recorded in the statutory reserve account already reach the sum of 10% of the share capital. In this third perspective, the law requires companies to allocate 10% of the share capital as a legal reserve. Until this threshold is reached, the partners must therefore allocate 5% of the profit made each year (minus the debtor transferred from year N-1) to the legal reserve. The legal reserve must amount to at least 10% of the share capital and is part of the capital. For example, for a company with a share capital of €10,000, the legal reserve must be at least €1,000. This regulatory threshold may be exceeded if the articles of association so provide. Hello, no, this is simply an accounting order. It is a bit like social capital, its amount is not put in a specific account, but in the current account of the company, and it can be consumed. However, the extent of this increase depends on the amount of the company`s share capital, which is freely determined (except in the case of joint-stock companies). The amounts placed in the legal reserve cannot be distributed to the partners, unlike the amounts of the other reserves. On the other hand, the legal reserve may be included in the share capital. Shareholders who meet at the general meeting are only obliged to return it with the help of future profits (until it reaches 10% of the new share capital).

Hello, The obligation to pay a legal reserve into an SAS only applies up to 5% of the amount of profits made on a statutory reserve account until this reserve reaches 10% of the share capital. Once this threshold is exceeded, the obligation expires, but the articles of association may continue to provide for an allocation of more than 5% and a threshold higher than 10% of the share capital. Hoping that our answer was useful to you, the LegalPlace team. The law provides that at least 5% of the annual profit of each financial year is allocated to the legal reserve of SAS until its amount reaches 10% of the share capital. Example of allocation of the reserve in the life of a company: The legal reserve is a cash reserve that is allocated in case of profits to encourage companies to consolidate their finances. From an accounting point of view, companies must distribute 5% of their profits within the limit of 10% of the share capital (shareholder contributions). SARL and EURL are required to allocate at least 5% of the profits made at the end of each financial year to an accounting account, known as a legal reserve. This obligation runs until the amount of this reserve reaches 10% of the company`s share capital (Article L 232-10 of the French Commercial Code). If profits are recognised at year-end, 5% of them are reinvested in the statutory reserve account. Note that partners cannot receive their dividend share until the 10% threshold is reached. Thanks for this article, there is still an open question.

In the first year, 5% of the result is greater than 10% of the share capital. Should only 10% of the capital or 5% of the result be allocated? As soon as the threshold of 10 % and thus the level of the minimum reserve is reached, the allocation to the legal reserve can be stopped. It must be taken over in the event of a capital increase. Under no circumstances should the money from the legal reserve be distributed to shareholders in the form of dividends. It also cannot be used for the acquisition of shares within the company. The two legal ceilings (allocation of 5% and threshold of 10% of the share capital) are minimum amounts, the articles of association may provide for an allocation obligation of more than 5% and a foundation threshold of more than 10%. Conclusion: The statutory reserve is a regulatory reserve whose annual endowment amounts to 5% of profits and is limited to 10% of the share capital. But of course, and this is not an accountant who will tell you otherwise, you should not hesitate to donate the other existing reserves to establish the financial stability of your business. From the moment the company makes a profit, shareholders are required to allocate at least 5% of their amount to a legal reserve account until it reaches 10% of the share capital. As soon as this threshold is reached, this assignment obligation expires.

In the event of a change of capital during the year, the rules for constituting the legal reserve in SAS adapt to the nature of the change: the reserve must represent 10% of the share capital, it can be modified a posteriori. When allocating the profit of a commercial company of the SARL type or a joint-stock company (in particular SAS and SA), the partners are required to allocate part of the profit to the legal reserve, up to 5% of the profit made and within the limit of 10% of the share capital. The creation of a legal reserve allows the company to set up relief funds that can be used to meet social obligations. If you opened your accounts on 31. December 2019, you are technically subject to the old rules and your annual accounts must continue to contain share capital and a legal reserve (which you must therefore continue to build up in accordance with the provisions of the old company regulations). Please note that a limit must be respected, the reserve is limited to 10% of the share capital.