The reserve fund is a special monetary fund that any joint-stock company must form at the expense of net profit. Information about the reserve fund is the most important indicator of the financial stability of an enterprise, since it is from it that the JSC is obliged to cover losses, redeem bonds and redeem shares in the absence of other funds.
According to the federal law of the Russian Federation on joint stock companies, they are obliged to form a reserve fund and reflect the conditions for its formation and use in the charter. The size of the reserve fund must be at least 15% of the authorized capital of the company, and annual contributions to it must be at least 5% of the net profit. However, by decision of the meeting of shareholders, the size of this fund and contributions to it may be increased. As soon as the size of the reserve fund reaches the minimum amount stipulated by law, the deductions can be stopped.
The reserve fund can also be formed in a limited liability company. But, unlike JSC, LLC is not obliged to do this. This is his right. Also, the legislation of the Russian Federation determines that with an increase or decrease in the size of the authorized capital of a joint-stock company, the minimum size of the reserve fund increases or decreases accordingly.
The right to dispose of the resources of the reserve fund is vested exclusively in the board of directors or the supervisory board. If at the end of the year the joint-stock company has received a loss, part of the reserve fund or this fund is completely directed to repay the losses received.
Theoretically, any legal entity of its own free will create a reserve fund and use the funds from it for the social development of the enterprise, for the payment of dividends, for capital replenishment in case of insufficient profit, and simply for unforeseen expenses or in case of crises. At the same time, you should keep funds only in reliable and accessible financial instruments. Experts advise taking the monthly income of the enterprise as the minimum size of the reserve fund, and six months as the maximum. Too large a reserve fund is an unwise withdrawal of capital from the financial life of a firm. Since these funds must be frozen or stored in reliable, but low-yield assets, the withdrawn capital will not bring the required income and postpone the implementation of financial goals.
