Everything you need to know about the legal reserve in SCI
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In summary: The legal reserve is a share of a company's profits that must be allocated each year to a specific account, until it reaches a threshold set by law, generally 10% of the share capital;
The allocation to the legal reserve is obligatory for SCIs with IS , but optional for those with IR ;
It is carried out at the time of approval of the company's accounts ;
In addition to the legal reserve, an SCI can constitute other types of reserves such as the statutory reserve or the optional reserve .
The legal reserve: what is it?
The legal reserve is an accounting obligation that applies to the majority of companies, whether civil or commercial. It consists of allocating a fraction of annual profits to a specific account, in order to constitute precautionary savings. This sum is taken before any distribution of dividends to partners or shareholders.
It fulfills several strategic objectives:
Ensure financial stability : In the event of losses, it allows the company to have a fund to mitigate the financial impacts;
Building the confidence of financial partners : Creditors, such as banks or other investors, appreciate that the company maintains reserve funds. This is seen as a sign of prudent and responsible management;
Protecting share capital : By consolidating equity, the legal reserve protects the contributions of partners or shareholders, reducing the risk of having to recapitalize urgently.
