The New Law About the Corporate Shareholders Registration

Text translated, adapted for English, and taken from the Costa Rican national newspaper La Republica. This article was published on Monday, December 10th, 2018. It was written by Costa Rican lawyer Douglas Soto. For the original Spanish version follow this link: https://www.larepublica.net/noticia/registro-de-transparencia-o-beneficiarios-finales

As a mechanism to provide the State with more tools to combat tax fraud and, additionally, to fight against the legitimization of capital, Law N ° 9416 called “Law to improve the fight against tax fraud” was approved (the “Law”), which was regulated by Presidential Decree No. 41040-H (April 5th, 2018),” Regulation of transparency and final beneficiaries registration (the “Regulation”).

 The main innovation contained in the Law is the creation of the “Registry of transparency or final beneficiaries”, popularly known as “Register of Shareholders” (the “Registry”). This Registry will be constructed and fed through the information that, obligatorily, certain subjects, cataloged by the Law as obligated, must provide about who its shareholders and final beneficiaries are, as long as their participation within these persons or legal structures can be categorized as substantive. Based on the above, it is necessary to make certain precisions; in order to understand the scope of these new regulatory provisions.

Obligated subjects – Corporations and Individuals:

 The subjects who are obliged to provide information on who their shareholders or final beneficiaries are can be framed in four large groups, namely:

1. Legal persons and legal structures domiciled in Costa Rica. As legal persons, we must understand those companies incorporated in accordance with the formalities of the Commercial Code and registered in the Commercial Register and, by legal structure, that form of integration or association, whose organization and exercise is carried out on a legal basis, which includes those forms that have the capacity to act and assume the legal responsibility for their actions.

2. Trusts (public trusts are excluded), who must inform the object of the contract, who is the trustor, fiduciary and beneficiaries.

3. Third-party resource managers.

4. Non-profit organizations, whose activities are linked to the performance of certain acts classified as “good works”.

Final beneficiaries:

 The reference to final beneficiaries should be understood as those natural persons who have a substantive influence or control, whether direct or indirect, on the legal entity or legal structure, implying therefore that:

i) they have the most votes in the corporation,

ii) they have the right to appoint or revoke the appointment of those who make up the administrative, management or supervisory bodies in the corporation or;

iii) they have the control conditions of the company by virtue of their bylaws in the corporation.

In reference to the subject of control, it can be direct or indirect.

It is direct when the natural person owns sufficient shares or holdings to control the legal person/corporation or the national legal structure. Indirectly, it is the control that is held over the legal entity that, in turn, has participated in the legal entity or national legal structure. If the shareholding belongs to a foreign legal entity (an international corporation who is the primary shareholder of the Costa Rica corporation), in case it is impossible to identify the final beneficiary and whenever there is no reason for suspicion, it will be presumed that the final beneficiary is the administrator (natural person who exercises the legal representation of the legal entity domiciled abroad, as defined in the Regulation).

 If the person responsible for supplying the information is unable to identify all the shares of the foreign legal entity, he must demonstrate this faithfully by means of an affidavit.

Additionally, you must attach the respective official documents that are generated in the foreign country and that demonstrate the impossibility of identifying the final beneficiaries, either certifications issued by transparency records similar to those in Costa Rica and located in the country of origin, certification of bylaws or any other valid document, by means of which it is stated that there is no information about who the final beneficiaries are, or that the share capital consists of bearer securities.

Substantive participation:

Legal entities or legal structures will be obliged to provide information about their shareholders or final beneficiaries, as long as their participation within the entity is equal to or greater than 15% of the total capital, as defined in the Regulations.

Therefore, whenever a movement is generated within the shareholding structure of the person or legal structure; To modify the report previously made to the Central Bank of Costa Rica (the “Bank”), the corresponding update of the information on the substantive shares of the shareholders and final beneficiaries must be sent again to the Bank.

Notarial and registry matters:

In accordance with the Law and the Regulation, prior to the issuance of any document referring to an obligated subject, public notaries must verify the list of subjects that have not complied with the provision of information established by the Law and that the Bank will create for such purposes, in order to record in the documents to be issued that the obligated party is within the list of non-compliant subjects.

Notaries public may access this list through their digital signature and, to verify the status of Notary, the Transparency Registry and final beneficiaries will confirm the information in real time before the National Notarial Office.

For its part, the National Registry will not register any document or issue certification of personality related to the subjects bound by the Law and are on the list of non-compliers. For example, if you sell your property you will not be able to receive any nationally registered documents to complete the sale.

Formalities:

The provision of information must be made annually, or whenever a change is made in the shareholder composition or final beneficiaries that warrant updating the information previously sent to the Bank. For this, the obligated subjects will have a term of 15 working days to provide the information, the previous thing from which the change was settled in the corresponding register of shareholders.

The information provided will have the character of an affidavit and must be provided by the person responsible for the subject defined by the Regulation (legal representative for persons and legal structures, the fiduciary in the case of trusts, legal representative or agent for administrators of resources of third parties and the president or who exercises the representation, in the case of non-profit organizations). Once the information has been provided, it must be kept by the obliged party, in case the authorities require it to be submitted later. The responsible party must provide the Bank with the information through a digital signature certificate. However, this condition may be impossible to fulfill in the case of those legal persons or structures whose representatives are foreigners, since to obtain the digital signature certificate a valid identity document is required in Costa Rica, either identity card or identification document for foreigners (Dimex)(A lawyer, notary, or Digital Signature holder will have to fulfill this role for foreigners).

Therefore, given a large number of legal entities whose legal representatives are domiciled abroad, the authorities are analyzing various options that facilitate the process of providing information. In this regard, an option that has been proposed is the authorization for the legal representative to grant a power of attorney to a third party, holder of a digital signature certificate, so that the latter can comply with the information supply requirements. This power must comply with legal formalities, that is, be authenticated by a notary public and be apostilled.

Exceptions:

The Law clearly states that it is not applicable in the following cases:

1. The entities subject to the supervision of the General Superintendency of Financial Institutions (SUGEF), by the General Superintendency of Securities (SUGEVAL) and the General Superintendence of Pensions (SUPEN), the foregoing in relation to its depositors.

2. The companies listed on an organized stock market, whether Costa Rican or foreign.

Compliance:

The Law will be in full effect for January 1st, 2020.  We recommend that you reach out to your lawyer to begin the registration process.

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