And/or Invest in Real Estate in Costa Rica
To purchase real estate for investment purposes, many foreign individuals decide to use a corporate as the owner of such. This is the best decision for such purposes and we highly recommend it as the first choice to be used. Our Code of Commerce distinguishes four types of corporations, which are as follows:
Sociedad en nombre colectivo.
Sociedad de Responsabilidad Limitada.
The "Sociedad Anonima" also known as S.A., is the most widely used corporate structure in Costa Rica. It is pretty flexible, the best for commercial agility and the most versatile type of corporation in our legislation. The S.A. has many features, of which the most important ones are:
The capital is divided in shares and the shareholders will only be responsible to pay their portion. The company will be managed by a Board of Members that need to have at least three members as President, Secretary and Treasurer, these positions are legally mandatory and must be occupied by three different individuals. It will also have a "Fiscal" (person in charge to watch the company).
The judicial and extrajudicial representation of the company can be done by the President or any member of the Board appointed by the shareholders, it can have as many empower individuals as they want, and they can be revoked whenever is necessary. The representatives can have different types of powers:
- General Power of Attorney without a sum limitation: the empowered person can perform any act in the name of the corporation, and it can manage the assets at any time, buy or sale them.
- General Power: it is limited to management acts, as the signing of contracts, it cannot compromise the assets of the company, it cannot buy or sale them.
Any kind of power can by conditioned to be performed together by two or more people, individually, or limited to a certain amount of money. The name of the corporate can be in Spanish or any other language and will include the words "Sociedad Anónima" at the end. Currently you can put no name to the company, but for the registration its name will be the corporate identification number that the Pubic Registry gives.
For the constitution of a corporate you will need at least two individuals, and each of them will have at least one share. The Notary Publics are the only ones that can constitute a "Sociedad Anónima". As we already mentioned, the corporates are represented by shares, that are the titles through which it is credited and it is transferred to the partners. The shares are common and nominative and the corporate will have the ability to authorize and make one or more types of shares.
It is important to clarify that in Costa Rica the shares are indivisible, when there are one or more owners of one share, a common representative has to be appointed. The shares need to have at least the following information:
- Name, term and domicile of the company.
- Date of the constitution deed, name of the Notary who authorized it and the registration information.
- Name of the shareholder when the shares are nominative.
- The amount of the authorized and paid capital and the total amount and value of the shares.
- The series, number and kind of shares or certificates with the total amount of shares that it covers.
- The signatures of the Board of Members established in the formation deed. The shares can be endorsed to a third party without the approval of the other shareholders.
The corporations in Costa Rica can be merged, dissolved or extinguished. In the same way it is possible to represent companies, foreign corporations and to transfer their domicile to our country. The registration of a company in Costa Rica from its signing before the Notary Public until its registration (when it is activated) takes at least two weeks. Once it is registered, the Notary Public has to give the owners the constitution deed, the corporate identification card and the shares, and also provide the legal & accountant books.
The legal books are:
- Shareholder registry: It contains the shareholder condition, the distribution of the social capital and the property of the shares.
- Shareholders general meetings: contains the shareholders agreements and decisions about the corporation as a whole.
- Board of Members: exclusive for their agreements, they do not need to be shareholders.
It is very important to clarify that it is necessary to be in Costa Rica to form a corporation; someone outside of our country can accept a position in the Board by sending a letter to the Notary Public or to the Board of Members, but in case this person would like to become a shareholder, he would only need to get the endorsed shares.
In Costa Rica it is also possible to own a corporation without showing in the public registry. The person or group of people can purchase a company or can create one with different members and after its registration they would only need to endorse the shares. The shareholder book is private so no one outside the company has to know whom the shares belong to.
To conclude, our general advice is the use of a local entity, although foreign corporate entities can own land and operate in business activities in the country, the negotiation of contracts and registration procedures can get very complicated, incurring in delays that can have a very unfortunate result.