Reserve Formation: A Strategy ...

In the business world, where stability is rare and fluctuations are frequent, forming reserves is a crucial strategy for ensuring a company's continuity and financial stability. Article 123 of the new corporate system plays a key role in this context, as it gives companies the ability to allocate a portion of their profits for specific purposes, called "reserves." These reserves, which can be financial or non-financial, provide security for companies against future risks and help finance new opportunities.

The primary purpose of reserves is to preserve capital and ensure sufficient liquidity in tough times. Therefore, this strategy is a vital part of the financial and managerial planning of any company aspiring to grow and prosper in a challenging business environment.

The Importance of the Corporate System in Determining Reserves:

The company's bylaws set the internal rules, including how profits are distributed and reserves are formed. Allocating a certain percentage of profits to reserves helps companies in financial planning and protects shareholders' interests by ensuring profit stability and providing the necessary capital for future expansions and investments.

External Controls and the Role of Regulatory Bodies:

In addition to the rules set by the company itself, external entities, such as governmental and regulatory bodies, can impose specific requirements regarding reserves. These controls are important to maintain the health of the entire financial system and protect shareholders and investors from excessive risks.

The Role of the Ordinary General Assembly:

The ordinary general assembly of shareholders represents a platform where decisions about reserves can be discussed and made. This gives shareholders a voice in how profits are used, whether for cash distributions, investments in new projects, or improvements for employees, thereby enhancing transparency and increasing shareholders' confidence in the company's management.

Practical Examples:

1.       Reserve for Tough Times: Allocating a portion of profits to cover situations like economic downturns or market volatility.

2.       Reserve for Business Expansion: Establishing a fund to finance innovation and new expansions.

3.       Reserves for Employees: Supporting stability and welfare for workers and their families.

4.       Reserve for Profit Distributions: Ensuring the continuity of profit distributions to shareholders.

Conclusion:

In conclusion, forming reserves is not only a wise strategy for maintaining financial stability but also reflects the company's commitment to sustainable growth and social responsibility. Through proper planning and effective execution, companies can use these reserves to achieve their long-term goals and enhance the confidence of shareholders and investors.