20.2 Reserve capital

Reserve capital comprises mainly statutory contributions from profits generated in the previous financial years as well as from surpluses from the distribution of profits over the statutorily required contributions and from mergers of PGE S.A. with its subsidiaries.

According to the requirements of the Commercial Companies Code, entities with the status of joint-stock companies are obliged to establish reserve capital to finance losses. Each year this capital is increased with at least 8% of the Company’s profit for a given financial year as shown in its separate financial statements until this capital has reached the amount of at least one third of the Company’s share capital. Reserve capital equal to one third of the share capital may be used only to finance losses disclosed in an entity’s standalone financial statements and may not be distributed for other purposes. The use of reserve capital and other capital reserve is determined by the General Meeting.

As at December 31, 2020, reserve capital subject to distribution among shareholders amounted to PLN 12,022 million and PLN 13,281 million as at December 31, 2019.