BY ALEX THOMPSON

Hello Readers ! Sometimes enquiries I’ve received from new clients, led me to think that Costa Rican attorneys are not very “communicative” of corporation’s uses, requirements, and proper documentation. Therefore, this article shall approach the issue of a better understanding of Costa Rican Corporations, specially the “Sociedades Anónimas”, most commonly used entities in our country.

A corporation is a legal entity with independency from the patrimony of its share holders. Its responsibility is extended only to the patrimony or assets of the corporation. This “Juridical Person” may contract, buy, sell, etc. The “S.A.” is a great tool when you purchase a car, a property or start a business, because it’ll separate your personal patrimony from possible liabilities of the corporation, and vice versa. A “S.A.” also gives you, the advantage of eventually be coming anonymous when being a share holder.

Requirements: In order to create a “S.A.” you’ll need: At least two shareholders with the proportion established in the constitution. You need to fill at least four posts for the Board of Directors. Usually these posts are: President, Secretary, Treasurer and a Fiscal (auditor) of the Corporation. At least one of the Directors shall have Power of representation, which allows the “S.A.” to operate. Other formalities are name, legal address, etc.

When constituting a corporation you should establish with your Notary Public (In Costa Rica not all Attorneys are Notaries) the costs, terms and what’s included in the price. The process includes the constitution of the corporation in the Notary’s entry book (Protocolo), the registration in the National Registry, the legalization of the Corporate Books, all the taxes and fees, so you can have a perfectly working corporation.

Some attorneys will only give you a registered corporation and you’ll have to go through the trouble of legalizing your corporate books.

Corporate Books: Each corporation has to legalize a set of books. In the case of a “S.A.”, the corporate books are divided by: Three legal books (Acts for Shareholders Assembly; Acts for Board of Directors & Shareholders Registry) and three Accounting Books (Diary, Major & Inventory and Balances). The most important legal books are: The “Acts for Shareholders Assembly”, which, as the name estates, registers the decisions of the shareholders, regarding numerous situations, for example: Modifications of Corporate clauses and bylaws, substitutions of Directors and representatives, constitution of liens over corporate assets, etc.

The Shareholders Registry Book is a private registry of the owners of the corporation. It records who owns a percentage of the capital stock of the corporation. Since it’s a private registry it does not have to be presented to anyone, under normal situations. This grants the possibility of remaining anonymous in the corporation.

Tax Issues: All corporations are bound to present their tax returns, even if they have no profits or are commercially inactive. They have to pay a 750 colones yearly tax, as well. Not complying with the law may end in penalties from Tributación (Revenue Department).

It’s important to be careful if you’re buying an existing corporation. Some Firms constitute corporations in order to sell them to clients. As long as you know the Firm and the reputation of the Attorneys, is fine. An important part of the deal should be the registration of the Corporate Modifications, Directors and Representatives, according to your needs.

In addition, ask for the tax returns of the previous years, if applicable, and request a proper study on no debts or liens on the corporation.