Atlas · Accounting
The maximum limit for the legal reserve is 20% of the share capital
AnswerThe legal reserve is formed by 5% of the annual net profit until it reaches the maximum limit of 20% of the company's share capital.
Reviewed on 2026-10-02 · next review 2027-04-02
Data
| Who | Criterion | Consequence | Source | Data of the data |
|---|---|---|---|---|
| Company | Legal reserve formation | Application of 5% of annual net profit | Law 6.404/1976, art. 193 | 15/12/1976 |
| Company | Legal reserve | Maximum limit of 20% of share capital | Law 6.404/1976, art. 193 | 15/12/1976 |
| Company | Exemption from formation | Legal reserve balance plus capital reserves exceed 30% of share capital | Law 6.404/1976, art. 193, § 1.º | 15/12/1976 |
Data consulted on 02/10/2026.
Basis
- Law 6.404/1976, compiled (Planalto, in Portuguese): art. 193 establishes the mandatory nature of the legal reserve, its formation rate, the 20% limit, and the condition for exemption from formation in the fiscal year.
- Law 12.846/2013 (Planalto, in Portuguese): this regulation deals with the administrative and civil liability of legal entities for acts against public administration and does not address the legal reserve limit.
How it applies
The legal reserve must be mandatorily formed before any other allocation of the net profit for the year. The retention of 5% of the net profit persists annually until the total reserve balance reaches 20% of the share capital. If the legal reserve balance, added to the amount of capital reserves (described in art. 182, § 1.º, of Law 6.404/1976), exceeds 30% of the share capital, the company is exempt from forming the legal reserve in that specific year. The legal reserve is intended exclusively to ensure the integrity of the share capital and may only be used to offset losses or increase capital.
Limits
- The exemption from formation provided for in art. 193, § 1.º, considers the sum of the legal reserve and capital reserves.
- This sheet does not address other reserves (statutory, for contingencies, tax incentives, unrealized profits), which have distinct rules.
- Legislative changes subsequent to the consultation date must be mandatorily verified on the official Planalto website.