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Just What the Heck Are All Those Books For?

by Garland M Baker on April 25, 2024

Corporations have at least six of them

Believe it or not, these are the books of a corporation worth millions of dollars.

Everyone doing business or owning assets in Costa Rica using a company is required to have legal books.

The books, referred to in Spanish as libros legales, are obtained at the stationery store and then taken to the tax authority, Dirección General de Tributación or DGT for short. To obtain the agency’s blessing on the books, company operators fill out a form called Solicitud de Legalización de Libros. This translates into English as application to legalize books.

Tributación puts a notation and legal stamps on the first page of each book.

Legalizing books for the first time usually goes hand-in-hand with filing Form D-140 called Declaración de Inscripción, Modificación y Desinscripción en el Registro de Contribuyentes. This translates into English as declaration of enrollment, modification, and un-enrollment in the tax contributor’s registry.

Whether a company is active and paying taxes each year or just holding property (and not required to file an income tax return or pay tax), the company is required to have legal books.

Most people have heard of these books but have no clue as to what they do and why they are important. Very often they have been misplaced and, unbeknown to the owner, serve as a home for hungry termites.

There are around 12 types of books. However, most companies only have five or six. The run-of-the-mill sociedad anomima, usually referred to as an S.A., has six, and a limited company, referred to as an S.R.L., has five.

The books common to both company structures are: 1) Actas Asamblea de Socios or Actas Asamblea de Cuotistas (stockholders’ or shareholders’ minutes); 2) Actas Registro de Socios or Registro de Cuotistas (registry of stockholders or shareholders); 3) Diario (general journal); 4) Mayor (general ledger); 5) Inventario y Balances (inventory and balances).

The book that is unique to an S.A. is the Actas Junta Directiva or Actas Consejo Administration, the directors’ 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.

Why are these books so important? Why can’t the termites have them?

Two classes divide the legal books. One class is the actas or minutes, three books for an S.A. and two books for an S.R.L. The other class is accounting, three books for both S.A.s and S.R.L.s.

The actas are important because without them, movements in the Registro Nacional or national registry cannot be made legally.

Notaries are required to have minutes up-to-date and written in the minute books to make most changes to a company that requires public registration.

This means that a company is dead-in-the-water without books if important changes are needed to corporate structure, addresses, board of director makeup, ownership, and other corporate makeup.

Making an important change in the makeup of an S.A. or S.R.L. is impossible without having the books available.

The accounting books are important because Costa Rica’s Commerce Code, Article 251, requires the special books as part of doing business.

Most people think all this seems really dumb: writing by hand in books in the computer age.

Actually, there is some good sense to the laws mandating legal books. True, the origins come from times before computers, but hand-written entries in books are harder to “fudge” than easy-to-manipulate computer programs, applications and data.

Costa Rica’s national registry is full of fraud and mistakes regarding property ownership and company records. Having a good hand-written record of important transactions can save the day in some cases.

It is the responsibility of a company’s secretary to keep the minute books current. This includes bugging the company attorney to death until any appropriate registrations are filed, and most importantly, duly registered at the National Registry. It is the responsibility of the treasurer to keep the accounting books up-to-date. In an S.R.L., all three responsibilities fall on the shoulders of whoever is designated as the manager.

One great benefit of keeping a company’s corporate records, including legal books, in perfect order is that such a company can be transferred quickly and easily to another person or entity, as in a sale, without paying any kind of transfer tax. This can be a real tax savings when selling property or other assets.

Those who own corporations should rescue their books and make sure they accurately match the important decisions of the company. They should keep the books in a safe place or with an honest professional so they are handy when needed. The effort could keep corporation owners out of trouble and/or save them money down the road.

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{ 2 comments… read them below or add one }

gyorgyi m baunok October 3, 2024 at 7:01 am

I happy find these pages.I bought 2 property ,paying for the 3-rd.figured outh the seller do not registered me.he says registered in His SA books.He givet His atterney but I think is a false:Alfredo Alfaro Zamora ID # 2-473-534 where I can looking this atterney up in CRica? What is the site name .thanks GB He sells land over PC probably cheating everybody .

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Garland Baker October 3, 2024 at 7:56 pm

Dear Sir,

You can find this and any attorney listed at the Costan Rican bar association located at this address:

http://www.abogados.or.cr/privado/busqueda/index.php

Garland M Baker.

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