A Corporation (Sociedad Anonima or S.A) is a legal entity where one participates as a shareholder through a specific number of shares of a determined value. The social capital constitutes a distinct entity from personal assets. Agencies or branches can be established inside and outside of Costa Rica, engaging in various business activities.
If one wishes to invest or conduct activities without personal assets being liable for the debts acquired, a corporation is an excellent option. In this structure, liability is limited to the capital invested.
How does it work?
The General Assembly, comprised of shareholders, is the main governing body. It convenes annually and, if necessary, on an extraordinary basis. The corporation is managed by a Board of Directors, consisting of at least a president, secretary, and treasurer. A fiscal is appointed for overseeing affairs.
Establishing a Corporation
At least two shareholders are required for its formation. During incorporation, the entire social capital cannot be registered under a single person’s name. However, all shares can be later transferred to a single individual. To establish a company in Costa Rica, the partners must appear before a Notary Public to sign the respective deed of incorporation. Subsequently, the Notary Public must enter all the company’s information into the Public Registry. At the time of entering this data, the corresponding fees (stamps and corporate tax) must have been paid, along with the publication notice or legal announcement.
During incorporation, the following aspects must be defined:
– Corporate Name: This can be a fantasy name. It’s now possible to register corporations using the juridical ID number assigned by the National Registry.
– Social Capital and Share Distribution: The social capital can be set in national or foreign currency. A general or total amount must be defined. Additionally, the value of each share and how it will be distributed among the shareholders must be specified.
– Registered Address: This is the designated location for official communications.
– Corporate Term: The number of years the corporation will exist must be determined. Typically, a term of 99 years is used.
– Representation: By law, the president is the legal representative of the corporation, with powers of “General Attorney without limit.” However, additional representatives can be appointed.
– Resident Agent: When the corporation’s representatives do not reside in Costa Rica, a resident agent must be appointed to receive official communications on behalf of the corporation.
Foreigners Involvement in a Corporation:
According to the Constitution, foreigners have the same rights as Costa Ricans. Consequently, they can be partners in a Costa Rican company and establish one. Also, foreigners can acquire shares in an existing company. Foreigners can serve on the board of directors, act as representatives, or hold power of attorney in a Costa Rican company. However, when none of the representatives of a Costa Rican company have domicile or residence in Costa Rica, a Resident Agent must be appointed. The position of Resident Agent must be held by a lawyer with an office open in Costa Rica, and their role is to receive notifications on behalf of the company.
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Written by Edward Gudeman, Attorney and Notary
