COSTA RICAN COMPANIES
The Sociedad Anónima (S.A.) and the Sociedad de Responsabilidad Limitada or Limited Liability Company (S.R.L.) are the most common types of companies incorporated in Costa Rica.
For its legal creation, companies in Costa Rica shall be registered before the Mercantile Registry, a section of the National Public Registry. The new companies´ names shall be different from the names of already existing companies in Costa Rica. In order to facilitate the registration process, the Registry has authorized for new companies to use as its corporate name, its corporate ID number to be assigned by the Registry upon its registration. The aforementioned section of the Registry is in charge of registering the articles of incorporation of all companies in Costa Rica, as well as future corporate amendments. Once a company is duly registered, it may begin its operation.
According to the Costa Rican laws, a minimum of two persons who will be the initial stockholders shall grant the articles of incorporation of a company. Once the company is duly registered, there will be no restrictions on the number of stockholders of the company (i.e. sole stockholder).
All companies must have duly authorized corporate books. The corporate books consist of a Stockholders’ Registry Book, Stockholders’ Meeting Minutes Book, and three Accounting Books. Sociedad Anónimas also require a Board of Directors’ Meeting Minutes Book. Please be informed that these Books are needed in order to amend the articles of incorporation or in order to transfer the corporate stock.
Costa Rican companies need to have a determined management structure, which will vary depending if it is a Sociedad Anónima or a Sociedad de Responsabilidad Limitada, as indicated below. The directors will be empowered with the faculties granted through the articles of incorporation. However, the company may also grant powers of attorney or administrative capacities to additional persons who may not be part of the management structure, such as employees or counselors.
If the company’s representatives do not have a domicile in Costa Rica, a Resident Agent must be appointed. Said Agent shall have enough faculties to receive judicial and administrative notices on behalf of the company, and must be a duly incorporated lawyer in Costa Rica. Its appointment and removal shall be agreed through a Stockholders Meeting and recorded at the Mercantile Registry.
If the company will conduct a business activity in Costa Rica, it shall be reported as an active company before the local tax authorities. Additionaly, its dividends shall only be distributed if an approved Profits and Losses Statement determines that the company’s activity has generated profits. The Statement must be approved by a Stockholders Meeting. For such purpose, the company’s fiscal year normally ends on September 30th, as ordered by law. However, special authorizations may be granted by the Internal Revenue Service. Please take note that the bankruptcy of an S.A. or a S.R.L does not imply the bankruptcy of its stockholders, since their responsibility is limited to the payment of their initial contribution to the corporate stock.
The following pros and cons of each type of corporation (S.A. and S.R.L) are useful to understand in order to decide which one to use depending on each person´s particular needs:
I. Sociedades Anónimas (S.A.)
- Corporate Stock:
- The corporate stock shall be composed of a determined amount of common stock shares with voting rights. Preferred shares may also be issued with limited or additional rights.
- Shares in an S.A. shall be transferred by endorsement. Such transfer shall also be registered on the Shareholders´ Registry Book
- The Stockholders´ Meeting is the maximum corporate authority. Representation for said Meeting may be authorized by stockholders to third parties through proxy letters.
- The Board of Directors acts as the Board of the company and also performs the duties of a Corporate Executive Committee as it would in U.S corporations. Said Board must have a minimum of three members, which are President, Secretary and Treasurer; their faculties shall be established in the articles of incorporation.
- A comptroller must be appointed to oversee the adequate management of the company.
II. Sociedades de Responsabilidad Limitada (S.R.L.)
- Corporate Stock:
- The corporate stock shall be composed of a determined amount of nominative quotas.
- Quotas in a S.R.L. cannot be transferred by endorsement. Transfer is performed by means of a Quotas Transfer Agreement, which is subject to the approval of the remaining quota holders by means of a formal quotaholders´ meeting. Such transfer shall also be registered on the Quotaholders Registry Book. Please take note that the remaining quotaholders have the right of first refusal over an eventual quota transfer.
- The Quotaholders’ Meeting is the maximum corporate authority. Representation for said Meeting may be authorized by quotaholders to third parties through proxy letters.
- S.R.L.´s are managed by one or more managers and vice-managers. Said representatives will be empowered with the faculties granted through the articles of incorporation. In addition, Costa Rican law prohibits such managers or vicemanagers to represent other companies with similar economic activities, or to carry out such activities on their personal behalf. If desired by the quotaholders one sole Manager may be appointed to manage the company.
- No comptroller is needed.
- No Board of Directors is needed as the Managaer(s) are in charge of all the administration duties.
- Tax Purposes:
- S.R.L. may be treated either as a corporation or as a partnership under Regulations to Sections 301.7701-1 through 4, of the United States of America. Please review this information with your USA tax advisor and/or accountant if applicable.
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