The statutory legal reserve (réserve légale générale) is a mandatory equity reserve under Swiss CO art. 671, built by allocating a minimum of 5% of annual net profit until it reaches 20% of paid-in share capital. It protects creditors and cannot be distributed to shareholders while below the statutory threshold. Separate from voluntary reserves and retained earnings, it forms part of the restricted equity that limits distribution capacity. In due diligence, analysing the reserve's adequacy illuminates the company's distribution history and financial management practices.

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Example: a Swiss SA with CHF 1.0 million share capital has built CHF 150,000 of statutory legal reserve — 75% of the required CHF 200,000 (20% of capital). It must still allocate CHF 50,000 before reaching the minimum. Until then, mandatory annual allocations of 5% of net profit constrain dividend distribution — a point verified in the due diligence review of distributable equity.

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Hectelion analyses statutory legal reserve adequacy and distributable equity composition in Swiss acquisition due diligence and post-acquisition structuring.