IF you are considering doingbusiness or investing in real estatein Costa Rica, consider incorporatingas a first step for structuringyour investment. Then, choose thecorporate structure that best suitsyour specific interests and conditions.This decision will have amajor impact on your undertakingand could form the foundation forits success.When clients comes to ouroffice with the intention of startinga business in Costa Rica ormerely purchasing real estate forinvestment purposes, they arerarely aware that one of our recommendations will be toincorporate. Buying land in the name of a corporationoffers multiple advantages in areas such as taxation andestate planning and management.Although Costa Rican business law provides for manytypes of corporate entities, only two offer the investor thecomfort of a structure similar to that of the familiar limitedliability company: the sociedad de responsabilidadlimitada (S.R.L.) and the sociedad anónima (S.A.). Inboth cases, shareholders are only responsible for theirshare of the company’s corporate capital, and their personalassets are fully protected and out of reach of anypotential creditor the company may have.The S.R.L. is simpler than the S.A. Unlike the S.A.,the S.R.L.’s legal treatment within the Costa RicanCommercial Code is fairly scarce. Matters not coveredspecifically for the S.R.L. are regulated by the principlesestablished for the S.A.Our clients often prefer the S.R.L. as it allows thedecision to go corporate to be more in their hands, withoutdepending on people abroad for information and signatures.The main features of the S.R.L. are as follows:• Shares cannot be transferred to non-shareholderswithout the previous express consent of the other shareholders,who have first purchase option.• This type of company requires only one individual(manager) for administration, making it an especiallyappealing structure for cases in which the investor doesnot want to use and register the names of additional individualsto form what in the S.A. would be called a boardof directors, as explained below.THE S.A. is the most widely used corporate structurein Costa Rica. It is fairly flexible and its legal treatment isextensive. In general terms, it can have any amount ofcorporate capital (usually a small amount is used withoutany negative consequence) divided into as many shares asthe investor desires. It is important to know that shares inCosta Rican corporations cannot be divided; thus, it isadvisable to have a total number of shares equivalent tothe number of anticipated shareholders.The most important features of the S.A. are:• Since the positions of president, secretary and treasurerare legally mandatory and must be held by three differentindividuals, the S.A. must have a board of directorsof at least three members, as well as one comptroller, whomust not hold any powers of attorney on behalf of thecompany.• Shares are represented by physical documents, andmore than one of them can be included in a certificate.They can be transferred to any non-shareholder withoutthe approval of the other shareholders. Transfer is madethrough a combination of a transfer contract, the endorsementof share certificates and an entry in the company’sshareholder registry book.• Its bylaws can be changed at any time, as can anypowers of attorney existing for the company, by meansof a shareholder meeting, which can be held in thepresence of all shareholders or shareholder-appointedproxies.• An S.A.’s legal representatives (those holding powersof attorney to act on behalf of the company) are liablefor any of their actions that go against the interest of thecompany or its shareholders.• An S.A. must have three corporate books (shareholdermeetings, shareholder registry book and board ofdirectors meeting book) and three accounting books.These books must be authorized by the local tax authoritiesand are a requirement for implementing any changein the company’s bylaws or in its power of attorney structure,since shareholder meetings cannot be held withoutbeing recorded in the specific book authorized for suchpurposes.For more legal advice, contact Lang & Asociados at204-7871 or visit www.langcr.com.
