Missing corporate books can lead to a freeze of assets

Anyone with a company in Costa Rica is required to have legal books. The problem is the books are easy to lose or misplace.  It is impossible to do business or maintain a company without the books. If there are assets in a company with no books and no person designated to represent the company, what assets they hold are locked up and out of reach even to legitimate owners.

It can be a big headache to replace them, especially if for some reason no legal representative has been named for the company.

Many expats retire to Costa Rica in their golden years. Some of them die. When they do, it is not uncommon that they are the only representative of a company they set up to hold a home, property investment, business or other assets.

Legal books are bulky things. Some people throw them in a closet. Other do not know what they are and toss them in the trash. They are forgotten until the day arises when the assets the company holds need to be sold or transferred.

Whatever the reason, when they are needed and cannot be found, panic ensues.

Attorney Allan Garro of Garro Law found a catch-22 in the process to obtain new books and went to bat to clear up the confusion with the tax department and the Registro Público.  He succeeded, and it is now possible to so.

Recently, Garro also just won a major case against the Dirección Nacional de Notariado, the legal entity that supervises notaries. Attorney Garro has a reputation of going against the status quo when he finds confusion or injustice. Usually, he has to act alone.

He had found the Registro Nacional gave the power to replace books only to legal representatives and no one else, not even stockholders. Legal representatives can only be replaced with legal books, so if none exists and no representative is available, it would be impossible to replace company books.

Sociedad anónimas have three books and sociedades de responsabilidad limitada have two.

The books common to both company structures are: actas asamblea de socios or actas asamblea de cuotistas (stockholders’ or shareholders’ minutes), actas registro de socios or registro de cuotistas (registry of stockholders or shareholders).

The book that is unique to a sociedad anónima is the actas junta directiva or actas consejo administración, the director’s or administrators’ minutes.  This minute book records board of director decisions and is unique to this company structure because limited companies do not have directors, only a manager.

Before February 2013, the diario (general journal), mayor (general ledger) and inventario y balances (inventory and balances) were also required.

Here is the current process to replace legal books as clarified by the Registro Nacional. The best place to start is obtaining a certificación literal for the company.

1. Go to the registro’s digital service.

2. Sign up for an account or login.

3. Purchase a certificación literal de personas jurídicas.

4. Review the document to see who has representación judicial y extrajudicial. This assetstiedup072015means judicial and extrajudicial representation for the company.

5. If there is a person with such power, he or she can replace company books by going to a public notary. If no person with such power is available, here are the next steps..

6. Find the stockholder(s) of the company.

7. The stockholder(s) need to go in front of a notary with any documentation they might have regarding their stock ownership. With this documentation in hand, they must make a declaración jurada or sworn statement in front of the notary that they are the stockholders.

8. If the attorney is satisfied, he or she will proceed to replace the books.

9. Once the books have been replaced, the notary will proceed to change the representation of the company. This requires publishing another edict and filing a testimony from the notary with the new information on it at the registry.

The estimated total cost to replace books when a representative exists is around $1,000. The cost when one does not exist is about $1,500. The cost to start a new company is around $750. Prices vary among notaries.

Why would anyone in their right mind pay upwards to $1,500 to replace the books of an old company when a new one can be started for half that price?

The answer again are the assets, like the ownership of  a home, other real estate property, investments  or a business.

There are only two ways to transfer assets when they are in a company. One is by signing over the legal books to someone else. The other is by a legal representative transferring the assets in front of a notary. If no books or representative exists. The assets are stuck and cannot be sold.

In the case of heirs, they are double-stuck. To get to assets they need to start a probate action, get awarded the ownership of the company and then start the process to replace books.

When Costa Rican legal books are found lying around, expats should check to see if they hold assets. This is simple to do at the Registro Nacional’s Web site. If there are no assets, the correct procedure is to take them to a notary and have it unregistered. If assets exist, it is a good idea to check to see if the books are up-to-date and store them in a safe place.

In the case where assets are in a company with no books or legal representation, they should be replaced and the company updated. If they are not, heirs might suffer the consequences or an opportunity lost.

Garland M. Baker, a certified international property specialist, is a 45-year resident and naturalized citizen of Costa Rica. His firm’s team provides multidisciplinary professional services to the country’s international community.  Reach him at info@crexpertise.com.  Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica.  Find the collection at http://crexpertise.info, a free reprint is available at the end of each article.  Copyright 2015, use without permission prohibited.

This entry was posted in Costa Rica News. Bookmark the permalink.