How do I know which type of corporation is the right one for me?

by Quatro Legal Corporate Team | Jan 8, 2024 | Article, Corporate

This is one of the most common questions we get from our expat clients when they come to Costa Rica as there are two corporations that are almost unanimosly used to serve as investment vehicle when doing business or buying property. The two most common corporations in Costa Rica are “Sociedad Anónima” abbreviated as “SA,” and “Sociedad de Responsabilidad Limitada” or “SRL”. Both corporations offer stockholders protection from personal liability as they are independent legal entities that are separate from their owners. In choosing which is more suitable for you, the most important aspects to consider are the nature of the business, transaction or investment you will be undertaking, as well as the complexity of the relationships that will exist among stockholders. Both the SA and SRL are governed by bylaws drafted in accordance with the stockholders’ interests and that provide flexibility to ensure that business operations are conducted according to their needs. The corporate bylaws are a tool most entrepreneurs or investors undertaking specialized business and complex activities don’t take full advantage of due to a lack of professional guidance and advice.

THE SRL COMPANY. The SRL is one of the two most common types of corporations used in Costa Rica to conduct business, make investments, buy real estate or secure assets. The SRL was created to operate small enterprises in which the stockholders are linked by kinship or another relationship. This characteristic sets the tone for the rules that apply to SRLs. The SRL structure is much simpler than the SA. It does not have a board of directors, but is managed and operated by one or more managers who may or may not be stockholders. The SRL’s capital stock is divided into “quotas,” which are registered in the corporation’s Quota Holders Register. These quotas cannot be transferred by endorsement of the quota certificate like the shares of an SA. One of the most important characteristics of the SRL is that it restricts the transfer of quotas to third parties through the right of first refusal of the remaining quota holders. If a quota holder wishes to transfer his/her quotas to a third party, he/she must first offer them on the same terms and conditions to the remaining quota holders, who have the right to purchase them in the same proportion to the stock they already own. If none of the quota holders accepts the offer to purchase, then sale to a third party is authorized. These rules are intended to protect the kinship or relationship between the stockholders and, in several types of businesses and transactions, must be carefully studied or supplemented with a stockholder’s agreement so as not to impede the corporation’s operation or decision-making process.

THE SA COMPANY. The SA is one of the two most common types of corporations used in Costa Rica to conduct business, make investments, buy real estate or secure assets. The SA is a more complex structure than the SRL and is used to operate larger scale businesses, transactions or investments. The SA is controlled and operated by a board of directors which must include at least a president, secretary and treasurer. These positions have specific functions and powers within the operation of the SA. Additionally, a comptroller must be appointed, which is a mandatory position that cannot be occupied by a member of the board of directors. The SA capital stock is divided into shares, which are registered in the corporation’s Shareholders Register. Shares can be transferred by simple endorsement of the share certificate and share transfer restrictions are only applicable when established in the corporate bylaws or by shareholder’s agreement.

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