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Reinstating a Dissolved Corporation: Seizing the Second Chance

In recent weeks, we’ve been inundated with inquiries from individuals whose Costa Rican corporations faced administrative dissolution by the National Registry. These corporations fell into dissolution due to accumulated corporation taxes, surpassing the three-year mark, coupled with accrued interest. This scenario has particularly perturbed those with assets still registered under the corporate umbrella.

The pressing question has been, “What can we do?” Thousands of corporations, whether actively conducting business or holding assets, found themselves impacted by this legal mandate, appearing as “disueltas” or dissolved in the registry database.

New Law Now Allows the Reinstatement of  a Dissolved Corporation

However, there is a glimmer of hope. A recent legislative intervention, Law 9485, enacted on October 19th, 2017, offers a lifeline by allowing the reinstatement of dissolved corporations. This law aims to provide relief in light of the prevailing circumstances. You can find the full text of the law here: https://costaricalaw.com/costa-rica-legal-topics/corporations-in-costa-rica/4532/attachment/dissolved-costarica-corporation/.

Under this reform, which amends section II of the corporation law (Law 9428), dissolved corporations can regain their legal status by settling all past-due corporation tax debts. Notably, this includes waiving off interests and penalties. The deadline for settling these back taxes is December 15, 2017.

How do I reinstate my corporation?

So, how does one go about reinstating their corporation? The initial step involves clearing the outstanding corporation tax dues. Once this financial obligation is met, at least 51% of the corporation’s shareholders must convene before a Notary Public to sign a public deed requesting the reinstatement of the corporation’s status. Subsequently, the Notary Public lodges this deed with the National Registry, appointing a liquidator who will oversee the reinstatement process. The deadline for filing the reinstatement request is January 15, 2018.

Previously, the only recourse for a dissolved corporation was to initiate a complex liquidation process. However, this new law streamlines the reinstatement process, making it a viable option for those facing dissolution.

How do you recover your property from a corporation that has been dissolved?

But what about recovering assets from dissolved corporations? The National Registry of Costa Rica has administratively dissolved numerous corporations owing more than three years of annual corporation tax. Once dissolved, these corporations cannot be reinstated merely by settling back taxes.

Instead, shareholders must initiate a formal liquidation process to reclaim assets. This begins with convening a shareholder meeting to kickstart the corporate liquidation process as per Article 209 of the Commercial Code of Costa Rica. During this meeting, shareholders appoint a liquidator, whose resolution is then notarized and registered with the National Registry.

The Corporation Liquidation Process

The liquidation process proceeds in accordance with the corporation’s articles of incorporation or through mutual agreement among shareholders. Shareholders compile an inventory of corporate assets and liabilities, settling outstanding corporation taxes to facilitate asset transfer. Once the inventory and balances are approved, the liquidator can transfer assets to shareholders’ personal names, another corporate entity, or liquidate assets and distribute proceeds among shareholders.

Upon completion of asset distribution, the liquidation process concludes, bringing closure for shareholders.

In essence, this new law provides a second chance for dissolved corporations, offering a streamlined path to reinstatement and asset recovery, thus mitigating the adverse effects of administrative dissolution.