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book capital loss reduction effects

Given the current economic situation there are many companies that get results negative year after year, when that happens we find that reflecting our accounts in terms of capital does not correspond exactly with the real situation, to remedy this, Gazelle Circle recommend you make a capital reduction to cover these debts.
From the Department of Management Circle Gazelle, then try to leave this movement in the clearest possible through an example and a few basics to consider in drawing up these seats.
Corporations Act says that capital reduction shall be binding on the company when the losses its net assets have fallen below the 2 / 3 parts of the share capital and a fiscal year has elapsed without having recovered equity.
Let's see an example:
We have a company with net assets consist of: Capital Social € 10,000 € 7,500 voluntary reserves and legal reserve € 750. Drag
losses of previous years from 12,000 €
The first thing to do is see if it has forced the curtailment of mandatory capital losses: Equity
+750-12000 7500 = 10,000 = € 6,250 € 6,250
< 6.666 (2/3 de 10.000€)
Therefore, we would be required to make the capital reduction as new equity it to the underside 2 / 3 share capital company.
The law also says that not be able to deduct the capital in order to restore the balance between capital and equity when the society has some kind of voluntary reserves, or when the legal reserve, one after the reduction exceeds 10% of the capital.
continue with the example above:
will be affected by the reorganization the following accounts: Voluntary reserves
: 7,500 € and up to € 12,000 (loss we had) we must also reduce social capital and legal reserve, we will make representations of the following Mode:
12000-7500 = 4,500 €
To reduce the exact quantities and respect the ceiling of 10% mentioned above. Use a system of equations which we call Social Capital and Legal Reserves = X = Y to find the new amounts
X + Y = 4,500 €
750-Y = 10% (10,000-X) we have Solving
Social Capital = 4,318 ' 19 and Legal Reserve = € 181.81
When it is inscribed in the Commercial Register the new script with new equity will be held the following entry:
should: 7,500
113.Reserva Volunteer (equity) 181'81
Legal 112.Reserva (equity) 4,318
Social 100.Capital '19 (equity)
Haber: 12,000
negative 121.Resultados previous years (equity)

hope you this information is helpful, a greeting to the next post ...