1. When distributing the after-tax profits of the current year, the company shall withdraw 10% of the profits and include it in the statutory reserve fund stipulated in the Company Law. If the accumulated amount of statutory common reserve is more than 50% of the registered capital of the company, it may not be withdrawn (Article 167 of the Company Law). 2. After the company withdraws the statutory reserve fund from the after-tax profits, it can also withdraw any reserve fund from the after-tax profits upon the resolution of the shareholders' meeting or general meeting (Article 167 of the Company Law). 4. Use surplus reserve 1 to cover losses. When the company loses money, it shall make up for it by itself. When the company uses the extracted surplus reserve to make up the losses, it shall be proposed by the board of directors of the company and approved by the shareholders' meeting. 2. Transfer capital. When the company converts surplus reserve into capital, it must be approved by the shareholders' meeting. When the surplus reserve is actually converted into capital, it shall be carried forward according to the original shareholding ratio of shareholders. When the surplus reserve is converted into share capital, the surplus reserve retained after the conversion shall not be less than 25% of the registered capital. 3. When the statutory reserve fund is converted into capital, the retained reserve fund shall not be less than 25% of the registered capital of the company before the transfer. The Company Law does not stipulate how much surplus reserve fund is converted into share capital. It only stipulates that when the statutory reserve fund is converted into share capital, the retained reserve fund shall not be less than 25% of the registered capital of the company before the conversion. However, the arbitrary provident fund is extracted by the enterprise independently rather than legally, so its transfer is completely decided by the enterprise itself, and there is no legal restriction. In fact, it is a common operation method to transfer surplus reserve fund to registered capital. However, the law explicitly prohibits the company's financial personnel from using all surplus reserve funds to increase capital. The surplus reserve is related to the original registered capital of the enterprise. If the surplus reserve fund is less than 25% of the original registered capital, this operation is definitely not allowed.
Legal objectivity:
Article 166 of the Company Law When distributing the after-tax profits of the current year, the company shall withdraw 10% of the profits and include it in the company's statutory reserve fund. If the accumulated amount of the statutory common reserve fund of the company is more than 50% of the registered capital of the company, it may not be withdrawn. If the statutory reserve fund of the company is insufficient to make up for the losses of the previous year, the profits of the current year shall be used to make up for the losses before the statutory reserve fund is withdrawn in accordance with the provisions of the preceding paragraph. After the company withdraws the statutory reserve fund from the after-tax profits, it may also withdraw the reserve fund from the after-tax profits upon the resolution of the shareholders' meeting or general meeting. After-tax profits of the company after making up losses and drawing provident fund shall be distributed by the limited liability company in accordance with the provisions of Article 34 of this Law; A joint stock limited company shall distribute shares according to the proportion of shares held by shareholders, except that the articles of association of a joint stock limited company stipulate that shares shall not be distributed according to the proportion of shares held. If the shareholders' meeting, shareholders' general meeting or the board of directors violates the provisions of the preceding paragraph and distributes profits to shareholders before the company makes up losses and withdraws the statutory reserve fund, the shareholders must return the profits distributed in violation of the provisions to the company. The company's shares held by the company shall not be distributed.