Subjectivity of law:

In our country, capital reserve refers to the accumulation fund formed by accepting donations from others and equity premium during the operation of enterprises. Specifically speaking, it is the part that the enterprise receives the contribution from others that exceeds its share in the registered capital (or share capital), as well as the gains and losses directly included in the owner's equity. Article 169 of the Company Law, the company's common reserve fund is used to make up the company's losses, expand the company's production and operation, or increase the company's capital. However, the capital reserve fund shall not be used to make up the company's losses. Article 166 When distributing the after-tax profits of the current year between the statutory common reserve fund and any common reserve fund company, 1% of the profits shall be allocated to the statutory common reserve fund of the company. If the accumulated amount of the statutory common reserve fund of the company is more than 5% of the registered capital of the company, it may not be withdrawn.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year, the profits of the current year shall be used to make up for the losses before the statutory reserve fund is withdrawn in accordance with the provisions of the preceding paragraph.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 any reserve fund from the after-tax profits upon the resolution of the shareholders' meeting or shareholders' meeting. The after-tax profits of the company after making up the losses and withdrawing the 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, unless the articles of association of a joint stock limited company stipulate that the 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 with profits. Legal objectivity:

Article 166 of the Company Law When distributing the after-tax profits of the current year, the company shall allocate 1% of the profits to the company's statutory reserve fund. If the accumulated amount of the statutory common reserve fund of the company is more than 5% 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 any reserve fund from the after-tax profits upon the resolution of the shareholders' meeting or shareholders' meeting. The after-tax profits of the company after making up the losses and withdrawing the 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, unless the articles of association of a joint stock limited company stipulate that the 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 with profits.