Costa Rica: Holding of Ordinary Meetings: Exemption from Liability for Directors

At the beginning of the year the annual obligations of corporations take relevance, since they must be complied with to avoid fines and penalties, or to reduce risks related to the operation. This is the case with the Ordinary Shareholders' Meetings which, according to local legislation, must be held within three months after the closing of the fiscal year applicable to each company.

Although Costa Rican law does not establish any penalty or fine for not holding this meeting, it is highly advisable to hold it, not only for the purposes of order and corporate housekeeping, but also for liability issues related to the management. In this sense, the approval of the results of the annual financial year that takes place in these meetings automatically implies the approval of the management carried out in the corresponding financial period by the Administrators.

The foregoing becomes even more important when considering that the members of the Board of Directors and the Managers are by law jointly and severally liable before the corporation in case of damages caused by the breach of the duties related to their appointments.

Considering the above, it is evident that promoting the holding of the annual ordinary meeting should not only be seen as a practice without any sanction, but as a beneficial and necessary tool for the directors of the companies to be certain that they are properly fulfilling their obligations and avoiding an eventual claim.

At Arias we seek to ensure that our clients are up to date with the new regulations. For more information or questions do not hesitate to contact us at: tracy.varela@ariaslaw.com and gabriel.garita@ariaslaw.com

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.

Tracy Valera Calderón
Senior Counsel, Arias Costa Rica.

Gabriel Garita Hogg
Paralegal, Arias Costa Rica.