Capital reserve refers to the provident fund formed by an enterprise in the course of operation due to the acceptance of donations, share capital premium, revaluation of statutory property, etc. It is part of the owner's equity of the business and is not part of the profit of the business and cannot be used for dividend distribution. So, how to withdraw the capital reserve?
First of all, we need to understand the ** of capital reserve. Capital reserve mainly comes from the following situations:
1.Donations are accepted. When a business accepts donated assets, these assets are included in the company's capital reserve.
2.Equity premium. When an enterprise issues shares, if the issuance** is higher than the par value, then the higher part will be included in the capital reserve of the enterprise.
3.Revaluation of legal property. When an enterprise carries out a property revaluation, the part of the revaluation appreciation will be included in the capital reserve of the enterprise.
So, how do you withdraw these capital reserves?
Under normal circumstances, capital reserves do not need to be withdrawn. Because they are the ownership equity of the enterprise, which increases with the development of the enterprise, there is no need for the enterprise to take the initiative to withdraw. However, if the enterprise needs to use the capital reserve for specific purposes, such as converting to share capital, making up for losses, etc., then the enterprise can withdraw the capital reserve in accordance with the relevant regulations.
For example, an enterprise may use its capital reserve to increase its share capital according to a resolution of the general meeting of shareholders. This will increase the company's share capital while reducing the capital reserve. In addition, if the capital reserve balance of the enterprise is large, it can also be used to make up for the loss of the enterprise according to the provisions of the articles of association. This will reduce the company's capital reserve balance while increasing the company's undistributed profits.
It should be noted that the withdrawal of capital reserve must comply with relevant laws and regulations and the articles of association of the enterprise, and cannot be withdrawn at will. At the same time, the use of capital reserve must be in line with the strategic objectives and business plans of the enterprise, and cannot be used for unreasonable expenditures.
In short, capital reserve is a part of the owner's equity of an enterprise, which comes from the acceptance of donations, equity premiums, and legal property revaluation in the course of the enterprise's operation. Enterprises can withdraw capital reserves for specific purposes in accordance with relevant regulations. However, it must comply with the relevant laws and regulations and the provisions of the articles of association, and cannot be extracted and used at will.
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