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Wednesday, September 28, 2022

The Power of Attorney Law in Costa Rica

In Costa Rica Powers of attorney (POA) are regulated by law in the Civil Code (the Napoleonic civil code). All powers are regulated by the same law, in other words, POA for individuals have the same regulations as POA for corporations.

POA in Spanish are called PODER or MANDATO and they can be special, general, generalissimo and specialisimo (Poder especial, general, generalsimo or especialisimo in Spanish).

A special POA, which is regulated by article 1256 of the civil code, allows the person who is granted the power to specifically perform those actions which are set forth in the document and cannot extend to any other actions, even those which could be considered a natural consequence of the authorized actions.

In layman´s terms this means that a special power must be very carefully drafted because actions that may be considered as authorized, may not be included if they are not clearly spelled out. This often causes problems when dealing with bureaucratic processes wherein the grantor of the POA is not available and the authorities consider that certain actions are not authorized.

For example, a person that is given a special POA to sell a car may be considered NOT to be authorized to receive the price of the sale because that action was not specifically indicated even if the parties consider that action to be a logical natural consequence of the authorized action.

A general POA, regulated by article 1255 is a POA to manage only. The law considers it a power to administrate or manage.

The law specifically indicates what actions are included in this type of POA but the actions included are general in nature, such as actions necessary to protect assets, judicial actions necessary to protect possession issues or interrupt statute of limitations; rent chattel property up to one year or less but NOT real estate; sell products which by their nature are destined for sale or can perish if not sold; collect accounts receivable and issue receipts and all other actions which by their very nature are considered actions of management.

A “especialísimo” POA, which is regulated by articles 1253, 1264 and 1408 is a very special POA that is necessary in those cases in which the law specifically requires it. For example, this type of POA is necessary to issue a donation in the name of the grantor.

The generalissimo POA, which is regulated by article 1253 and 1254, it is usually refered to as “full and unlimited” and is the most inclusive of all, this type of POA is registered in the Public Registry so it is a public document available to all.

This POA usually grants the person full and unlimited powers, or they can be limited to certain amounts of money, limited by time or certain actions. With this POA the person can act as the grantor would act, except for cases where the law requires “especialísimo” POA.

Powers of attorney can be granted through private documents, through special attorney authorized acts or verbally. POA which are going to affect property that is registered, such as real estate, vehicles, mortgages and others or actions that must be registered, such as marriage, must be granted in a special attorney authorized act called “escritura pública” and some of them must be themselves registered.

The acceptance of a POA can be expressly stated or it can be implied by any action which executes the actual POA.

Many corporations are created by investors for the sole purpose of holding property or assets in that company. These corporations do not actually transact any business and therefore have no income.

Nevertheless, there are many obligations with which these corporation must comply, such as:

  • Shareholder report to the Central Bank,
  • Payment of corporation tax,
  • Annual shareholder meeting,
  • Annual income tax return or statement that the company has no income and others.

In many cases, the owners of these companies have to decide if they should name a third party to function as corporate officer, for example, President of the company, so that this person can sign any and all documents, statements, reports and returns necessary.

This means having to deposit your trust in someone that has full and unlimited power over your assets. It also means having to pay that person for their services.

If the investor wishes to remain as the company representative, then they will have to issue POA for every one of these actions which can usually have a significant cost.

By law and by default, the President of a corporation is the designated legal representative of the company and has full and unlimited powers but the shareholders can limit or expand the POA of the President, of other company officers or of any third party to represent the corporation.

It is very important to be aware of the documentation that the company will need on an ongoing basis so that you may decide the best POA structure necessary.

About the Author

Lic. Jorge Montero B. is a bicultural lawyer born in New York City, educated in the U.S.A. and in Costa Rica. He holds various specialties and master’s degrees in Criminal, Commercial, Environmental and Agrarian Law from the University of Costa Rica and has over 30 years of litigation, contract and counsel experience.

Offering digital consultation services with 12 legal consultations for $150.00 (plus $19,50 for 13% value added tax) with a 6 month expiration period. Consultations are only specific legal questions NOT cases or analysis of cases. These consultations DO NOT include legal advice for specific or general issues, ONLY legal questions on specific points of law.

Email: [email protected]; Tel: (506)- 8384- 2246; Whatsapp: (506) 8384- 2246

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