Basics of the Costa Rican Corporation – The Sociedad Anonima
I. INCORPORATION
To form a Costa Rican corporation the Commercial Code requires that at least two
individuals sign the articles of incorporation and subscribe at least one share
each.
There are no requirement that the incorporators be Costa Rican citizens. The
articles of incorporation must contain as a minimum the following information: (1)
the date and place of incorporation; (2) the name, nationality, occupation, marital
status, and domicile of the incorporators; (3) type of corporation being formed; (4)
corporate purposes; (5) its duration and possible extensions; (6) the amount of
authorized capital and the manner in which it shall be subscribed; (7) the cash,
property, or other capital contribution of the shareholders; (8) the domicile of the
corporation; (9) enumeration of powers; (10) names of the officers of the
corporation; (11) allocation of profit and losses; (12) corporate dissolution or
liquidation procedures.
Once the articles of incorporation are executed, they must be filed in the Costa
Rican National Registry for recording. Notice of the incorporation must be
published in the official newspaper, La Gaceta, for a period of eight days. Once
approved, the corporation is recorded in the Corporate Section (Personas
Juridicas) of the National Registry and issued a corporate identity card (cedula
juridica).
II. MANAGING THE CORPORATION – THE BOARD OF DIRECTORS
The corporation must have a three (3) member Board of Directors to manage and control its affairs subject to whatever restrictions may be imposed by the Shareholders. There are no nationality or residence requirements for Board Members. The most common practice is to have a President, Treasurer and Secretary. The Board of Directors selects the corporate officers and has the power to remove them. Generally, the directors, officers and managers are the same
individuals unless the shareholders elect to appoint different officers.
III. CAPITAL STRUCTURE
Costa Rican law requires that the articles of incorporation also set forth the (1) amount of paid in capital; (2) the number, par value, and classes of shares; and (3) the terms and method of payment for the shares.
The capital of a Costa Rican corporation is represented by nominative shares, which is an artificial value set forth in the articles of incorporation and appearing on the face of the certificates for shares. As such, a corporation can issue
common shares which can either be denominated in Colones, the Costa Rican currency or in Dollars. The law prohibits issuing common shares without any value or issuing bearer shares. In addition to common shares, the corporation may issue preferred shares so long as the class, preferences, rights, and limitations are set forth in the articles of incorporation. All shares are indivisible; this means that one share confers only one right. If there are several persons who own one share then they will have to elect one representative to act on behalf of that share.
IV. THE SHAREHOLDERS
The corporation only recognizes as Shareholders those that have been registered as such in the Shareholder’s Log Book. Shares can be transferred by simple endorsement and the relevant entry in the Shareholder’s Log Book. Generally, the identity of subsequent Shareholders does not have to be recorded in the National Registry thus ensuring confidentiality.
Each common share has the right of one vote. Thus, the Costa Rican corporation uses the concept of “straight voting” whereby each shareholder may cast the number of votes equal to the number of shares they hold. Shareholder meetings are divided into two categories, General and Special. The General meetings can be made up of all the shareholders while the special meetings are limited to those shareholders who have specific rights.
Furthermore, the General meetings are divided into Ordinary and Extraordinary. Extraordinary meetings are those which modify the corporate existence or which authorize the issuance of a class of shares or bonds which have not been set forth in the articles of incorporation. All other corporate matters are dealt with in the Ordinary meetings. The law requires that an Ordinary meeting be held once a year. In order to constitute a quorum, it is required that at least fifty percent (50%) of the voting shares be represented at the meeting. In order to adopt a corporate resolution it must be passed by a majority of the votes.
V. POWERS OF ATTORNEY
The Shareholders and members of the Board of Directors, if so permitted, may grant Powers of Attorney to third parties. The Powers of Attorney may be Special (Poder Especial) of General (Poder Generalisimo). The Special Power of Attorney is generally executed to accomplish a specific purpose such as purchasing a specific parcel of property, opening a bank account, or signing specific documents. The Special Power of Attorney is not registered in the Public Registry. The General Power of Attorney must be recorded in the Public Registry and it provides broad powers including the power of the attorney-in-fact to substitute their powers, all or in part, to another person.
VI. ADMINISTRATIVE
The Corporate Books: The Costa Rican corporation must log all corporate matters in the Corporate Books referred to locally as “Libro de Actas”. There must be three (3) Corporate Minute Books: (1) Board of Director’s meetings, (2) Shareholder’s meetings, and (3) a Stock registry (log) book.
To record the financial operations of the corporation the law requires that the corporation have and maintain the following books: (1) Inventory and Balances, (2) General Ledger, (3) Account Ledger. If the corporation is inactive for tax purposes because it is only a property holding company with no commercial activity then the corporation does not have to log activity on the accounting books. Check with your Costa Rica C.P.A. for specific situations.
Internal Auditor: The Commercial Code requires that each corporation appoint an internal auditor known as a Fiscal. The auditor may or may not be a member of the Board of Directors and he has a duty to safeguard the interests of the
Shareholders. To form a corporation the law requires at least 2 persons to appear before a Notary Public to sign the incorporation documents.
The Registered Agent: The Articles of Incorporation must name a Registered Agent who is located in Costa Rica and will receive service of process. This is only required if the Corporate representative is domiciled outside of Costa Rica.
Income Tax Reporting: The corporation is required to file a tax return once a year during the reporting period which is September 30 through November 30. A Costa Rican corporation is only taxed on income earned in Costa Rica, foreign
source income is not taxed.
Copyright 2015 By Roger A. Petersen -No Copying or Reproduction Allowed without written authorization from the copyright holder
