Under what condition can the legal reserve of Bimbo Foods Bakeries Distribution be distributed to shareholders?
Bimbo_Foods_Bakeries_Distribution Franchise · 2025 FDDAnswer from 2025 FDD Document
- ix) The Company's legal reserve is included in its retained earnings. In accordance with the Mexican Corporations Act, the Company is required to appropriate at least 5% of the net profit of each year to increase the legal reserve. This practice must be continued each year until the legal reserve reaches 20% of the value of the Company's share capital. The legal reserve may be capitalized but may not be distributed to the shareholders unless the Company is dissolved. Also, the legal reserve must be replenished if it is reduced for any reason. As of December 31, 2024, 2023 and 2022, the legal reserve is $500 (nominal amount) and it is fully constituted.
- x) As of December 31, 2024, 2023 and 2022, retained earnings include the reserve for share repurchases; the total approved amount (at face value) of said reserve is $1
Source: Item 14 — Other Accounts Payable and Accrued Liabilities (FDD pages 312–476)
What This Means (2025 FDD)
According to Bimbo Foods Bakeries Distribution's 2025 Franchise Disclosure Document, the company's legal reserve, which is included in its retained earnings, can only be distributed to shareholders if the company is dissolved. The company is required to allocate at least 5% of its annual net profit to increase the legal reserve until it reaches 20% of the company's share capital, as mandated by the Mexican Corporations Act.
This legal reserve serves as a financial buffer for the company. If the legal reserve is reduced for any reason, it must be replenished. As of December 31, 2024, 2023, and 2022, the legal reserve is $500 (nominal amount) and is fully constituted.
For a prospective Bimbo Foods Bakeries Distribution franchisee, this means that the legal reserve is not available for distribution unless the company ceases to exist. This requirement ensures the financial stability of the company and protects its ability to meet its obligations. The franchisee should be aware that this reserve is separate from other retained earnings, such as the reserve for share repurchases, which totaled $15,200 as of December 31, 2024, 2023 and 2022.