The Law 9416 to Improve the Fight Against Fiscal Fraud of 2016 created a “shareholders registry” to be under the custody of the Central Bank of Costa Rica (BCCR). The Law forces all legal entities in Costa Rica to reveal their real owners, including “final beneficiaries”.
The final beneficiary is an individual, who is able to exercise control or a decisive influence over the management or operations of the company or legal structure, directly or indirectly. The First Chamber of the Supreme Court of Justice has recently issued a ruling confirming that there is enough legislation authorizing the Tax Administration to create the Shareholders Registry given the tax relevance of such information, and that the law establishes that this request of information does not infringe the privacy rights.
A few weeks ago, the Ministry of Finance published the draft Regulation of the Shareholders Registry. We had the
opportunity of review the proposal and submitted our observations. Due to the significant implications for those conducting businesses in Costa Rica, it is important to keep up with the development and implementation of this Registry.
According to the draft Regulations, all legal entities, other legal structures (not defined in the law or the regulations), third-party fund managers registered with SUGEF, private trusts and nonprofit organizations, must annually disclose to the Bank the information of the final beneficiaries with a significant participation (defined in the draft Regulation as a participation equal or higher than 15% in the capital stock or structure).
Of particular importance is the second paragraph of Article 10 of the draft Regulation, by which, subsidiaries or branches of foreign companies, where final beneficiaries cannot be identified, will have to registered their Manager (understood as the appointed legal representative in Costa Rica), as the final beneficiary. This presumption is not only inconsistent with the obligation of authenticity, integrity and trustworthiness that must be guaranteed by BCCR as manager of the shareholders registry, but also imposes a great deal of responsibility for legal representative of multinational companies, which in ultimately are not the true final beneficiaries.
This is a crucial issue first and foremost for the executives of companies that: a) have complex structure of ownership and are controlled by several other companies and do not incorporate individual participants; b) are controlled by a number of individuals, none of whom formally comply with the criteria of the final beneficiary (. e.g., each have less than 15% in participation).
We will continue with the analysis of the proposed regulation in the following publications.
Luis A. Aguilar