Want to start a business in Costa Rica? Let’s look at the details
Second in a series of columns by Steven Ferris, a Costa Rican attorney with extensive, direct experience in the Costa Rican judicial system, now in private practice.
Following last week’s column about the basic requirements to start a company, where we focused on a sociedad anόnima as the most common and practical step, we now will look into the process in more detail. You’re probably used to seeing company names followed by the initials “S.A.” That’s because most companies end up going that route. The process to set one up requires a notary public of your choice, to whom you must provide the following information:
1. Location and date whereupon the original documentation originates.
2. Full names, nationalities, professions, marital status, and home address of those forming the company. Remember that if you are a Costa Rican, you have two surnames – one is your father’s and the second is your mother’s. However, if you are from a country where your legal name does not include a second surname, that fact must be explained. This is legally acceptable, and not a problem.
Marital status is another issue that may not appear as simple as it sounds, and is scrutinized. Depending on your country of origin, nomenclature may differ. In Costa Rica you obviously must specify a status such as single, married or divorced, but further, you must specify the number of times you’ve been married or divorced. If your spouse is deceased, you also have to spell out how many times you’ve been widowed. It’s not allowed, for example, to simply state that you’re single if you’ve divorced a spouse or two. This is all related to the constitutional rights of families, which we’ll address in a future column.
3. Legal name of any other company that will be a founding member of the company. In addition to, or instead of, individual owners (people), a sociedad anόnima can be owned by other sociedades anόnimas.
4. Type of company to be formed. This refers to the four types of companies we discussed last week.
5. Purpose of the enterprise. What will the new company do and be used for? Standard categories include things like manufacturing, service provider, etc. In practice, however, it’s fairly easy to cover a wide range. For example, it may be said that its principal purpose will be general commerce, as well as the import and export of goods, without limiting it to broader businesses, such as manufacturing, farming, tourism, and even allowing it to purchase, sell or mortgage a wide range of types of properties within the statutes of the corporation. It can form and own other companies and offer guarantees to others as long as it can be shown to have to its own economic advantage. It can open bank accounts locally or abroad, participate in court actions, obtain concessions, franchises, patents, and represent other firms. It can be a party to contracts and other types of legal associations and relationships. A sociedad anόnima can pretty much do anything that doesn’t directly conflict with its original charter, even if it was not originally envisioned by the founders.
6. Company name. We discussed this topic last week in some detail. An important point to keep in mind is that really any name works, as long as it hasn’t already been used. It can be real words or a figment of your imagination. If in another language, a translation must be included.
7. Time frame. In most cases the original charter defines a duration of 99 years, so that renewals aren’t necessary. There is a prescribed procedure for reducing the time frame should that become necessary.
8. Capitalization. This is how much money the founders are putting up and a time frame in which it will become available. This must be defined in legal currency, which in Costa Rica is colones. Typically, the minimum is 1,000 colones, which today is roughly $2. We should be clear that this amount is tied to its purpose, but obviously 1,000 colones isn’t going to go far if you’re really going to do business. The capital worth of the company is easily increased through contributions from the founders, which must be corroborated. Reducing the amount of capital is more complicated, and must be approved by a judge.
9. A description of the nature of each partner’s contribution to the capital of the enterprise, be it in cash or some other item of value. Such items must have an assessed value. This is an important point. If the value is overestimated, the partners are responsible for making up the difference.
10. Legal domicile or address. Of course a real address within Costa Rica is a requirement. This was also referred to in my previous column. A Costa Rican address in no way limits the company’s ability to do business elsewhere. All official and legal communications will be tied to this address.
11. Naming of individuals responsible for managing the enterprise. Individuals must be named and their responsibilities specified, as well as proof that they accept these responsibilities. Normally, this entails providing a list of the members of the board of directors – the minimum required members are president, secretary and treasurer. Additional management can also be defined at this time if desired.
12. Legal representative (Agente Residente). If none of the named owners, partners or managers has legal Costa Rican residency status and address, an agente residente must be named. As we discussed last week, this person must be a licensed lawyer with a local place of business.
13. Financial charter. The manner in which finances will be managed must be defined, including how profits and losses will be distributed.
14. Dissolution. The charter must clearly define the conditions under which the company will be dissolved.
15. Legal reserve fund. Five percent of the company’s financial resources must be reserved, and increased up to an amount that represents 10 percent of the company’s assets.
16. Liquidation. The specific mechanism by which this will eventually occur must be defined.
17. Selection/election of those responsible for liquidation. This process must also be clearly defined, if individuals were not previously identified, as well as the functions they will perform.
18. Other instructions. Founding members have the ability to define any other specific instructions when defining their charter.
As we discussed previously, all of this must be duly recorded and placed in the public record. This comprises both publication in the official government newspaper La Gaceta and inscription in the Registro Mercantil of Costa Rica.
Steven Ferris is a member of the board of directors of The Tico Times’ parent company.
Also recommended: It’s getting more expensive to give up your US citizenship
You may be interested
Throwback Thursday: 2006 Arenal Volcano lava flowsThe Tico Times - March 4, 2021
Arenal Volcano's July 1968 eruption destroyed three small villages, killed 87 people and wiped out 232 square kilometers of crops…
MOPT warns of higher traffic fatalities as measures are easedAlejandro Zúñiga - March 4, 2021
The Public Works and Transport Ministry (MOPT) is reminding drivers to follow the rules of the road when traveling this…