Howler Magazine - - Community - By Ivan Grana­dos

Most busi­nesses in Costa Rica are run through a legally reg­is­tered cor­po­ra­tion. One of the first de­ci­sions to make when ac­quir­ing an ex­ist­ing busi­ness is whether to pur­chase and keep the ex­ist­ing cor­po­ra­tion's stock or to just pur­chase its as­sets and trans­fer them into a new cor­po­ra­tion. By tak­ing over the ex­ist­ing cor­po­ra­tion, a pur­chaser risks ac­quir­ing li­a­bil­i­ties or con­tin­gen­cies not shown in the cor­po­rate books, and pos­si­bly not dis­cov­ered dur­ing due dili­gence. Al­though you may not be per­son­ally re­spon­si­ble, your in­vest­ment could be at risk.

Legally, if you opt to ac­quire the ex­ist­ing cor­po­ra­tion, some pro­tec­tion can be pro­vided by in­clud­ing cer­tain clauses in the of­fer to pur­chase agree­ment, and sub­se­quently in the clos­ing doc­u­ments.* The seller can also be re­quired to ex­e­cute an af­fi­davit to guar­an­tee full dis­clo­sure of any and all cor­po­rate li­a­bil­i­ties, and also to pro­vide guar­an­tees and state­ments re­gard­ing the good stand­ing of the cor­po­ra­tion and its as­sets.

If you opt to ac­quire only the as­sets of the cor­po­ra­tion — and not the cor­po­ra­tion it­self — when set­ting up a new cor­po­ra­tion, all per­mits, li­censes, bank ac­counts and lease agree­ments re­lat­ing to the ex­ist­ing busi­ness must be reap­plied for in the name of the new cor­po­ra­tion. This process can take four to six weeks. To avoid this de­lay, most peo­ple pur­chase the cor­po­ra­tion's stock and its as­sets, un­der­stand­ing the as­so­ci­ated risks and/or po­ten­tial li­a­bil­i­ties. They can ex­pe­dite the pur­chase of the “com­mer­cial es­tab­lish­ment” based on the process es­tab­lished in sec­tions 478, 479, 480, 481, 482, 483, 484, 485, 486, 487, 488, 499 of the Com­merce Code.

In this case, the pur­chaser could pur­sue le­gal ac­tion if it were proven that the seller was hid­ing rel­e­vant or vi­tal in­for­ma­tion and/or acted in bad faith.

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