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Basics of the Costa Rican Corporation, by Roger A. Petersen
I. INCORPORATION
To form a Costa Rican corporation the Commercial Code requires
that at least two individuals execute 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
1. 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
to record (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: (1)
Inventory and Balances, (2) General Ledger, (3) Account Ledger.
2. 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.
3. 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.
4. 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.
I. INCORPORATION
To form a Costa Rican corporation the Commercial Code requires
that at least two individuals execute 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
1. 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
to record (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: (1)
Inventory and Balances, (2) General Ledger, (3) Account Ledger.
2. 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.
3. 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.
4. 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.
Basic Principles of the Costa Rican Corporation (S.A.)
By Roger A. Petersen
By Roger A. Petersen
No Copying or Reproduction Allowed without written
authorization from the copyright holder.
authorization from the copyright holder.