Future transitions in the Costa Rican corporate regime

By: Nikole Sánchez

At this moment there are two bills in the Legislative Assembly that are important for the Costa Rican corporate regime.

The first bill is registered under file number 22.567, which proposes to reform clause 10) and repeal clause 13) of article 18 of the Commercial Code, as well as to reform article 20 of the Law of Judicial Notifications. The purpose of this is to make electronic mail a valid means to notify commercial companies.

Article 18 of the Code of Commerce establishes the necessary requirements that the articles of incorporation of mercantile corporations must contain, among which we are interested in, it provides that the corporation must have a current and certain address within our territory, in order to validly deliver the notifications and in case there is no legal representative in the national territory, a Resident Agent must be appointed, who must be a lawyer, have an open office in our country and additionally, must have sufficient powers to receive judicial and administrative notifications in the name of the corporation.

The following text should be added to paragraph 10): “Additionally, an electronic address must be provided through an email account that guarantees the receipt of the current notification in order to receive notifications from the administrative and jurisdictional authorities”. By adding this text, the functionality of the appointment of the Resident Agent would be fulfilled, and therefore his work would no longer be necessary, which is why it is necessary to repeal paragraph 13) of said article.

The rule only refers to administrative and jurisdictional notifications, so there is still the doubt of what happens with the formal notifications between private parties, for example, if you want to notify the termination of a contract, could it be done through the e-mail registered by the company? We think and hope that this is an issue that will be resolved later, but there is a question about the literalness of the rule.

Currently, Article 20 of the Law on Judicial Notifications establishes the means by which legal entities must be notified and indicates that one of the valid means is through their Resident Agent when appropriate. Since subsection 10) of Article 18 of the Code of Commerce has been amended and subsection 13) has been repealed, it is necessary to amend the means of notification to legal entities and include e-mail as a means of notification and eliminate the option of the Resident Agent.

The proposed text for the reform of Article 20 of the Judicial Notifications Law is as follows:

“Article 20- Notifications to legal persons.

Legal entities, unless otherwise provided by law, will be notified through their representative, in person or at their place of residence, or at their actual domicile. In addition, notification may be served at the contractual domicile, at the corporate domicile, the actual registered domicile, or in the case of commercial companies, at the electronic address recorded in the Commercial Registry. The electronic account must be duly registered and updated in order to receive notifications from the administrative authorities and judicial instances. The omission to indicate it necessarily entails the application of the automatic notification.”

This reform would imply a lower economic expense for the owners of Costa Rican corporations, since they would not have to incur in the expense of appointing a Resident Agent, as well as an ease of receiving notifications, it is also an advantage for third parties with open judicial proceedings since the Court will be able to notify them in a shorter time and for the State since there would be a faster and more efficient way of notifying the corporation.

The second Bill is registered under file number 20749, this bill seeks to reform transitory II of Law number 9428, Tax on Legal Entities, what is wanted is to revive again the mercantile corporations that were dissolved for being delinquent for three consecutive periods with the taxes to legal entities, as it happened in 2017 with the Lazarus Law.

Trading companies, subsidiaries of a foreign company and limited liability sole proprietorships, dissolved and delinquent with the tax on legal persons between the periods 2016 to 2021, will have until December 15, 2022 to pay the amounts owed without the need to cancel interest and/or fines. Once this tax has been paid, the partners holding at least 51% of the shares will have until January 15, 2023 to submit to the National Registry by means of a public deed the request for the termination of the dissolution of the company, leaving the company in the same legal condition in which it was before its dissolution.

The approval of this project would be a great benefit for the partners of each company that has real or personal property, since there would be no need to go through the liquidation process and therefore there would be no need to pay transfer and stamp tax.