The Stock Company In Costa Rica
(Sociedad Anonima En Costa Rica)
Mondaq Business Briefing
February 21, 2006
When investing in Costa Rica, as in other countries around the world, investors
frequently find themselves facing the dilemma about which is the best option available
when purchasing any type of real estate, whether to do so as a natural person, that
is, in their own name, or whether to form a company, which constitutes a legal entity
and all the implications that comes along with it. In every day usage, these types
of organizations have a wide range of functions and applications with diverse and
very interesting elements which, nowadays, investors find increasingly attractive,
especially foreigners who are coming to the country more and more for the purpose
of investing, particularly in real estate.
All of this in spite of the fact that both forms of acquiring real estate are recommendable,
that is, purchasing in one's own name as well as in the name of a company; however,
in the case of the latter option, because of its regulation on the one hand and
the flexibility of its structure on the other, persons acquiring their properties
utilize it and, even though they are not dedicated to a specific business, in general
they prefer to protect their assets through a company, especially through the two
modalities that are most utilized in our country as is the case of the Limited Liability
Partnership and the Stock Company, which we will discuss in the present article.
The Stock Company, better known as "S.A", is the type of company most utilized in
Costa Rica, as its legal normative is quite extensive and is applicable to other
types of companies for which there is an absence of applicable legislation in each
specific case.
In terms of its formation, the Stock Company must be constituted by at least two
individuals who must appear personally before a Costa Rican Notary Public and, as
in other cases, the constitution act must be registered by said Notary, and after
its constitution, the shares may be transferred and it is legally acceptable that
one person holds all the shares.
The company must elect a Board of Directors with a minimum of three members: President,
Company Secretary and Treasurer and a Fiscal. Each position must be held by four
different persons. Each one of the persons who constitutes the company may hold
one of the positions mentioned above.
With regard to representation, the members of the Board of Directors have to determine
the persons who will be the legal representatives or attorneys-in-fact, or the manager
of the company; normally it is at least the President. Said legal representatives
will be granted general powers to act on behalf of the company. Their power may
be limited to sums no greater than a specific amount or to certain actions; it is
also possible that the joint action of two of the representatives is required for
certain actions or for executing transactions of a diverse nature, for determined
amounts.
A name has to be chosen. It may be in Spanish or in a different language, provided
that it may be translated to Spanish, and it may not be identical or similar to
any other company name already registered. For this, a study of the records must
be done so as to establish whether there already exist identical or similar names.
The share capital has to be established with a minimum of ten thousand colones,
as well as the number of shares and, because the individual shares are indivisible,
it must be an adequately high number for any transfer or distribution of shares
that may occur in the future. The number may be from 100 to 1000 or more.
Through an Assembly of Shareholders, all the appointments and characteristics of
the Stock Company may be modified, about which there must be a record in the Company
Books in case there is need to modify the company statutes when required.
Particularities of the Stock Company:
Although the most important aspects of what constitutes a corporation have been
explained, it in no way diminishes the need to list each of the obvious characteristics
of this type of company so as to be able to illustrate them in a clearer manner
and, in addition, to include other particularities that have not yet been mentioned.
As initially mentioned, the Stock Company is the most utilized type of company in
Costa Rica and it has a broad and specific normative which may be applied to other
types of company organizations in the absence of specific legislation.
The partners only have responsibility equivalent to their capital contribution.
The personal assets of the partners may not be pursued by creditors.
The positions of President, Company Secretary and Treasurer are legally binding
and there must be a Fiscal who has no representation power. There has to be a Board
of Directors with at least three members.
The company shares are represented by physical documents and several of them may
be included on one certificate. The same may be transferred to someone who is not
a shareholder without requiring the approval of the other shareholders.
The transfer of shares is done by contract, an endorsement of the certificates and
has to be recorded in the Shareholders Book.
The statutes may be modified over time as well as the powers of representation conferred
by an Assembly of Shareholders which may take place with all the shareholders present.
Those who act in legal representation of the company are responsible for the actions
that have been carried out contrary to the interests of the company and its shareholders.
With regard to the Company Books, there are six books in total; there are three
corporative books, one for the Assembly of Shareholders, one for the Registry of
Shareholders and one for the Meetings of the Board of Directors; in addition, there
are three accounting books. Once these books are on hand, they have to be presented
to the corresponding Tax Administration to be authorized and they are indispensable
for the implementation of any changes in the statutes of the company, as well as
any change in powers, all of which has to be transcribed in the book established
for this purpose and must take place in the Assembly of Partners.
Another important clarification to make has to do with the share capital specifically
from a taxation point of view because the higher the share capital, the higher the
taxes to be paid; in terms of the shares to be distributed among the partners, it
is also worth pointing out that they are indivisible pursuant to Costa Rican legislation
since the legislation does not authorize their division, and therefore the best
option is to carry out a distribution in the simplest way that allows for future
distributions in terms of capital as well as earnings.
It is in this way that the Stock Company and its application in Costa Rica proves
very efficient when acquiring assets, given its versatility and broad coverage when
one wishes to invest, purchase a property and finally, in practice, its use is extensive
and when these types of transactions are carried out through a company, the process
and the common procedures required by the corresponding authorities are facilitated,
the transfers are effected in an easier and more efficient manner and as mentioned,
its structure is flexible for all matters that are an everyday occurrence in our
country.
Furthermore, it is possible to foresee other benefits such as the avoidance of futile
and long successor processes in the case of the inheritors of the ownership of assets
and all that refers to the taxation of the company, since it is a well known fact
that the expenses of a legal entity are more flexible than the expenses of a natural
person as well in terms of representation, which occurs through the granting of
special and general powers and other authorizations to take actions because the
physical presence of the person in question and who constituted the company is not
required.
Still on the subject of the taxation of the company, being an aspect that can not
be excluded, it is important to emphasize that the companies in general are required
to be registered before the corresponding Taxation Administration. If during the
fiscal year in Costa Rica, the company is inactive or is not engaged in the determined
business, it does not have to be formally registered in the Department of Taxation.,
as would be the case of a company that engages in business activities of any kind.
In the case in question, the company has to present the corresponding books of rigor
for their corresponding authorization, and it is necessary that at the end of the
fiscal year, a declaration is presented explaining that the company did not carry
out any economic activity during the period because the contrary would result in
the application of sanctions for failure to file a declaration at the end of the
fiscal year in process. In Costa Rica, the fiscal year is from the first of October
to the thirtieth of September each year, and there is a period up until the end
of December for filing the declaration. When dealing with companies that are related
to or are dependent on foreign entities, this fiscal year arrangement may be dealt
with in a different manner.
In Costa Rica, speaking from a registration point of view and the system used, it
may be described as a hybrid system for companies based on the following: on the
one hand, the constitution of a company, its corresponding incorporation deed, as
well as any modification to its statutes must be registered in the Public Registry
for Property so that the data may be accessed by any interested party; on the other
hand, with regard to the transfer of company shares, it must be recorded in the
Book for the Registration of Shareholders, to which only the shareholders and the
Board of Directors may have access. If said information needs to be examined by
a third party, a judicial order to this effect must be solicited.
On the matter of national and foreign companies, even though a foreign company already
in operation may exist, the best option is to utilize a Costa Rican company for
the simple reason that, when dealing with a foreign company, the registration and
the transactions to be carried out would be more complicated; if the decision is
made to utilize the foreign company, the best procedure would be to register it
in the Business Registry of Costa Rica as a branch and at least grant it certain
powers so that, in this way, the process to be followed is less complicated and
the activities may be carried out in the simplest way and in the correct manner.
To conclude the present article, it is convenient to consider that, in spite of
the fact that the corporations in Costa Rica are not considered international companies,
as are certain types of company organizations that are utilized for example in the
United States and other jurisdictions, their utilization is always recommended because,
from a legal standpoint, they are considered as very solid and very safe, given
the extensive legislation that governs and regulates them. From a registration point
of view, there is in place a formal and well established system and, of course,
at the moment of application, it has proven itself to be safe and adaptable to the
needs and interests of the each person. Furthermore, to date, the corporations in
Costa Rica do not pay taxes on income generated outside of Costa Rica, provided
that this income does not enter the country and there is no link made between the
amounts reported as income because, in such a case, taxes would have to be paid.
Therefore, when facing any concern about constituting any kind of company, the best
option is to consult an expert on the subject such as a law firm that offers a complete
service. Our firm does so being one that incorporates companies, maintains them
in inventory and offers them to our clients already constituted and registered,
thereby avoiding delays so that at the moment the interested party wants to execute
the purchase of an asset of any type, he knows that there already exists a company,
only that the required changes be made which will be done by the same firm. As such,
when the client invests in our country, it is done in the proper manner, as per
the law and with greater efficiency so that the business into which he ventures
will be successful.
Bio: Licda. Adriana Vargas Zamora a lawyer, notary and is an expert in international
asset protection and tax strategies. She specializes in wealth protection and tax
minimization, international asset protection trusts and foundations, international
business corporations, limited liability companies, worldwide investing, yacht registrations,
and global banking. Ms. Vargas is a member of ITPA (The International Tax Planners
Association), ABA (American Bar Association), IBA (International Bar Association),
IFA (International Fiscal Assocation) and The Colegio de Abogados en Costa Rica.
To find out more about any offshore tax havens or set up a tax plan that is right
for you, please call for a FREE Report "The Tax Planning Guide", or drop an email
to the author.
The content of this article is intended to provide a general guide to the subject
matter. Speacialist advice should be sought about your specific circumstances.
Ms Adriana Vargas Zamora
LPS&C
Suite 6508
8345 N.W. 66th Street
Miami
UNITED STATES
Tel: 8006201887
Fax: 8006201887
E-mail: jonathan@itpa.org
URL: www.redseamanagement.com
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