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(506) 223-1327        Published Monday, Aug. 7, 2006, in Vol. 6, No. 155       E-mail us    
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A clever clause can dodge the probate mess
By Garland M. Baker
Special to A.M. Costa Rica

Now there is a new way to duck messy probate in Costa Rica.

Thanks to an avid reader with a ton of patience, a limited liability company called an S.R.L. in Costa Rica, is now even a better vehicle for holding assets and succession planning.  Most professional people do not know this secret.  

Limited Liability companies are great for holding properties and manging businesses, but if there is only one manager and the manger is taken by death, a long legal struggle can take place.

If there are multiple managers, the liability company runs the risk of internal confusion and sometimes theft.

Technically, S.R.L. stands for Sociedad de Responsiblidad Limitada in Spanish.  An S.R.L. is equivalent to an L.L.C., which stands for limited liability company in other parts of the world.

Two or more people form the business structure and hold shares in the organization. One person usually manages the company, but there can be more than one, many in fact. There is no limit to the number of managers a limited liability company can have.

As flexible as a limited liability company is, if there is only one manager, his or her absence, as in death, would freeze everything in the company until there was a shareholders meeting.   In many cases the manager is the majority shareholder further complicating matters.

If the limited liability company has more than one manager, too many bosses tend to mess things up as a rule.  More importantly, one of the managers could go wild and sell off all the assets of others.  It happens.

In succession planning, some parents make their offspring managers and create the same problem.  The kids go nuts and sell off all the assets of the parents.

Now it is possible to make the second and subsequent managers' positions conditional based on succession.

The secret is simple but it took the Registro Nacional more than three months to approve the language.  It goes this way:

In the constitution of the limited liability company in the clause outlining management there are two parts.  One is listing the managers and the other is outlining their powers in the company.

One seeking to use this trick should list all the managers in this section giving them all the same power to manage the business affairs of the entity.  However, after this is written, at the end of the clause, one should add a section stating that if the first manager is not available or incapacitated that is when the second manager can take the place of the first not before. The same can be true for a third manager. If the second is unavailable, the third can take the place of the second.



Actually, the end of the clause on managers can be flexible.  Another option would be to have manager two and three act jointly in the absence of the first.

In the clause, it is important not to mention death.  The Registro Nacional at one time accepted the word death as part of the clause but will no longer do so.  That's why it rejected the setup of a limited liability company for the avid reader, who wanted to pass on assets to a third party in case of death. Fortunately, the reader was able to wait three months while this new concept of managerial sucession got approved by the technicians at the Registro.

The essence of the legal language is to substitute not replace someone in the management position.   However, this works perfectly in the case of death avoiding probate in the same step. 

For example, Pete has a property in Costa Rica and puts it in an limited liability company making himself the manager.  Pete with foresight makes his son Pete Jr. a manager in his permanent absence or disability.  

Pete dies.  Pete Jr., as manager, can move any assets in the limited liability company to another one that he controls and does not have to go through probate to do so.

Probate is a thing to avoid in Costa Rica, much like it is in other parts of the world.  Usually, it is a long road filled with legal potholes.  Big ones.

It is possible to setup sociedad anonimas or S.A.s, a legal structure like a corporation, in a similar fashion, but it is much more difficult because S.A.s always have a president, a secretary, a treasurer and a fiscal.  They are a more complex type of an organization usually answering to stockholders.

Garland M. Baker is a 35-year resident and naturalized citizen of Costa Rica who provides multidisciplinary professional services to the international community.  Reach him at info@crexpertise.com.  Lic. Allan Garro provides the legal review.  Reach him at crlaw@licgarro.com.  Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica.  Find the collection at http://crexpertise.info.  Copyright 2004-2006, use without permission prohibited.


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San José, Costa Rica, Monday, Aug. 7, 2006, Vol. 6, No. 155


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Illegal weapons found
in dance scene sweep


By the A.M. Costa Rica staff

Fuerza Pública officers conducted a sweep of the Centro Comercial El Pueblo over the weekend and confiscated three handguns and detained 10 illegal aliens, they reported.

The loaded handguns contained illegal cartridges with bullets designed to expand on impact, officers said.

The circumstances of the handgun confiscations were not clear, but one man with the last name of Villalobos carried two weapons, officers said. One was a 9mm. with 11 cartridges in a clip. The other weapon had 15 shells loaded, officers said.

A second man, who had the last names Vargas León, had a 9mm. handgun with as clip of 18 cartridges, the Fuerza Pública officers said.

The aliens were nine Colombians, including two women. The 10th individual was a Nicaraguan.

El Pueblo is a tourist center with a handful of dance locations that are filled with young people on the weekend.

In Limón Saturday Fuerza Públic officers encountered four private guards who did not have permits to carry guns, officers reported.  Confiscated were three .38-caliber revolvers and a 12-gauge shotgun. Three guards were working for the Seguridad CST firm, said the Fuerza Pública.

Trout fingerlings ready
for country's fish farms


By the A.M. Costa Rica staff

For those in the aquaculture business, the Instituto Costarricense de Pesca y Acuicultura is having a sale on rainbow trout fingerlings. The institute has 300,000 of the fry available at its Ojo de Agua facility in Dota on the Interamerican Sur at milepost 78 at Cerro de la Muerte.

The small fish are available at 32 colons (about six U.S. cents) each, the institute said.

Trout in Costa Rica are cultivated at locations above 1,500 meters (about 4,900 feet), and there are about 309 farms that grow trout, said the institute.  In 2005 the industry produced 522 tons of the adult fish, the institute said. The trout is called trucha arco iris in Spanish.  More information is available at 200-5049 and 248-1196.

Heart-wrenching tale
dominates local news


By the A.M. Costa Rica staff

Forget the Middle East. Forget bird flu. And forget even fútbol. The news story that stole the hearts of Costa Ricans over the weekend is that of Panchito, a lad kidnapped in March 2001.

El Diario Extra reported that a child resembling the missing boy has been living on the streets of Managua. The newspaper in concert with Channel 10 in Managua managed to bring the boy together with Ángela Potosome, the mother of the missing Francisco Sánchez Potosome. That was Friday night.

However, officials in Managua are seeking a DNA test, and a woman there says she has the birth certificate of the boy in question. Photographs show similarities.

The missing child, who would be 11 now, vanished when a stepfather took him from the schoolyard in Desamparados. The man did two years for kidnapping, but investigators have never been able to locate the child.

Arias meeting presidents
at Uribe inauguration

By the A.M. Costa Rica staff

President Óscar Arias Sánchez will have a big day in Bogotá today. He will be meeting with the presidents of other nations and with President Alvaro Uribe who takes office again at 3 p.m. after a successful re-election campaign.

Arias is to meet with Michelle Bachelet, the president of Chile, at 9:30 a.m. and then with Carlos Lage, the vice president of Cuba.

Arias has a meeting with Uribe at 11 a.m. where he is likely to recount a summary of his meeting Friday with Colombian rebels who asked for his help in negotiating a peace in their land.

At 11:15 a.m. Arias is to meet with the presidents of the countries involved in the Plan Puebla-Panamá integration and the Mesoamerican energy initiative.

At 1 p.m. Arias will be a guest at a formal luncheon given by Uribe. At 5:30 p.m. after Uribe is sworn in, he will meet with Alan Garcia, the new president of Perú.

Arias will spend the night in Colombia and fly home Tuesday morning.

More Internet goodies planned

By the A.M. Costa Rica staff

Radiográfica Costarricense S.A. says it is not only creating cheaper service plans but that it will supply from three to five mailboxes to each user in September as well as the capacity to chat online, access to a personalized online agenda and the option of wireless roaming in the areas where it has wireless service. Details are available on the company's Web page.

Quake hits near Dominical

By the A.M. Costa Rica staff

An earthquake of about 3.9 magnitude rattled southwestern Costa Rica Saturday about 1 p.m. There was no reported damage. The epicenter of the quake was near Dominical on the Pacific coast.

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San José, Costa Rica, Monday, Aug. 7, 2006, Vol. 6, No. 155








Wisdom of this phrase is in urging mouth to stay shut
Por la boca muere el pez.

“By the mouth dies the fish.” A fish gets hooked by being tricked into opening his mouth at the wrong time.  Likewise, people who don’t know when to keep still often find that their mouths can get them into a lot of trouble. So, this dicho has to do with gossip and people who talk too much.

Perhaps a word about “fish” in Spanish is in order: When a fish is swimming freely in the sea or a river it is referred to in Spanish as el pez. But after the fish gets caught he is referred to as el pescado. So you should not say that you saw un pescado swimming in the river. What you saw was un pez. By the same token, you would not go to a restaurant and order pez, rather, in this instance, you would ask for pescado. Though it may seem otherwise, I assure you that the Spanish did not invent two words for the apparent same thing for the solitary purpose of making your life more difficult.

Por la boca muere el pez can be applied to many forms of chismes, or gossip. When I was a schoolboy our teacher used to play a sort of “broken phone” game to illustrate how we humans usually only hear part of what has been said to us. And, how when we repeat to a third party something told to us by someone else, we fill in the blanks, that is the parts we didn’t hear in the first place, with what we imagine was actually said. Of course the literal accuracy of one’s imagination often leaves much to be desired. This is why verbal agreements are best put into writing so there will be no “misunderstandings” later.

But, back to the broken phone game: One of my classmates was so bad (or “good,” as the case may be) at this game that virtually everything she repeated — supposedly from what she had heard, of course — was totally inaccurate. I mean, this girl must have had a serious hearing problem. But this flaw did not deter her from incessantly running her mouth. If you wanted to get a rumor started about someone, all you had to do was tell it to this girl

The
way we say it

By Daniel Soto


because by the time she got finished with it the most innocent little chisme was bound to have become the scandal of the century.

My niece and her husband love to go fishing. They go every chance they get, but their catch never seems to match up to the stories they tell about their past angling exploits. Once in Golfito they sat at the end of a long pier fishing throughout a raging thunderstorm, as I watched from the shelter of a near-by restaurant, and only came back with a catch no bigger than an anemic pilchard. Again at Lake Arenal, of course they preferred to go fishing while the rest of our company took a fascinating boat excursion around the lake. When we returned, after an hour and a half, this time they had caught nothing at all.

Last week we went to Puntarenas and they marched off bravely again, fishing gear in hand, in search of the eternal “one that got away.” They returned hours later with nothing to show for their efforts. Later that night they did manage to land a hapless blenny that looked like it might make a decent meal for a peckish kitten.

So, from all this I have concluded that most fish are a good bit better at keeping their mouths shut than many of the humans of my acquaintance. 



Monetary Fund supports letting colon float in market
By the A.M. Costa Rica staff

The international Monetary Fund supports a decision by Costa Rica to let the colon float in a limited way.

Representatives of the fund, after a two-week visit here also supported the central government's takeover of a $2.8 billion debt run up by the Central Bank in defending the colon exchange rate.

"Supported by prudent fiscal policy, these steps should help entrench the gradual decline of inflation to the low single digits envisaged by the authorities," said the fund in a report released last week.

Now the colon is devalued daily, and although the amount varies in practice, the devaluation totaled 8.4 percent in 2005.

The Banco Central de Costa Rica proposes a daily range for the colon. At first the range will be limited, but some observers believe the colon eventualy will be let loose to face market forces.

The Banco Central ran up the $2.8 billion debt keeping the colon rate in check. The central bank was, in effect, subsidizing the exchange rate maintained by the state banks. The is a proposed law in the legislative hopper for the central government to assume the $2.8 million debt of the Banco Central. The central government will issue bonds to cover the debt, which is something the central bank cannot do.

The head of the fund's mission that visited here was Dominique Desruelle, division chief in the Western Hemisphere Department. The mission also backed new taxes.

"Looking ahead, Costa Rica's main challenge is to increase economic growth in a sustainable and balanced way," said Desruelle in a statement. "Higher economic growth, combined with a significant reduction in inflation, would improve the living standards of all citizens and reduce poverty. The mission agreed with the authorities that a multi-pronged approach was necessary to accomplish these goals.
"At the center of this strategy is the initiative to pass a comprehensive fiscal reform, with a focus on the income tax and the value-added tax. The mission recommended a package of sufficient size to ensure medium-term fiscal sustainability, provide resources for the recapitalization of the central bank, and allow for an increase in spending on infrastructure, education, and other social needs.

"The mission agreed with the authorities' proposal to develop a multiyear budget framework, which would allow the government to present to the public a clear medium-term economic and fiscal strategy and, hence, enhance budget transparency. The mission concurred with the authorities that an increase in the level of infrastructure investments is needed, as long as efficient and transparent mechanisms are used and these investments do not increase fiscal risks."

While inflation in the country has remained in the double digits, Costa Rica's "near-term" economic outlook remains favorable, the fund reported.  For 2006, the country's gross domestic product is expected to increase by 6.5 percent, while inflation is likely to remain at 12 percent, it said.

The fund said, however, that Costa Rica’s economic outlook is not "without risks as a cooling of the U.S. economy or a further increase in oil prices could adversely" affect economic activity.

Costa Rica's main challenge, said the IMF, is to increase economic growth in a "sustainable and balanced way," adding that higher economic growth, combined with a significant reduction in inflation, "would improve the living standards of all citizens and reduce poverty."

The fund statement said it strongly supported the Costa Rican government's commitment to seek ratification and implementation of a U.S. free-trade pact with Central America and the Dominican Republic.  The United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua signed the treaty in August 2004.  The legislatures of all those countries except Costa Rica have ratified the agreement








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New system to track sex exploitation will be shown
By the A.M. Costa Rica staff

The nation's sex crimes prosecutors will be involved in a new project that seeks to attack cases of the commercial exploitation of children and youth.

The Poder Judicial said that the project will be outlined Friday in the presence of the president of the Corte Suprema, Luis Paulino Mora Mora, and the chief prosecutor, Francisco Dall’anese Ruiz.

The informational system will be installed in the eight offices of prosecutors that are specialized in sex crimes and domestic violence, said the Poder Judicial.

However, the first step is to conduct a study of the strengths and weaknesses of the country for setting up such a system, said the Poder Judicial.

The system appears to be a computerized data base that would contain the characteristics and method of operation of those who would exploit children and youth. The system also would monitor and evaluate the investigations and the court actions against those who are involved in such cases, said the Poder Judicial.

The system is being provided by the Fundación Paniamor, the Italian government, the United Nations and an international organization.

The Poder Judicial and the Ministerio Público, the independent prosecuting arm, have been embarrassed in the last two years because a special task force of the Ministerio de Gobernación, Policía y Seguridad Pública started arresting sex crime suspects and criminals who
 had been on the loose for years. In many cases, the individuals had been convicted but had not been delivered to prison.

Security mininstry agents tracked down some 46 fugitives in 2005 alone. These were convicted criminals who the Sección de Capturas of the Judicial Investigating Organization was supposed to collar. Some had been on the run for years. The most spectacular arrest by the special security ministry unit was of a school teacher during a student assembly in Zarcero Sept. 14.

The response of the Judicial Investigating Organization and Dall’anese was to prohibit elements of the security ministry from doing any kind of investigation. They said that investigation was the sole responsibility of the judicial police and prosecutors.

The arrest Oct. 9, 2003, of Sinaí Monge Muñoz, a madam specializing in providing women to the well-heeled, further embarrassed the Poder Judicial. As the case unfolded, it became clear that even some judicial police operatives were her customers. Some ministry cars were seen at her establishment, presumably to pick up prostitutes for delivery. Little of the evidence collected in an intensive and prolonged investigation of the woman ever was revealed in court.  Dall’anese said later that there was no customer list found. The woman got eight years, a sentence that was interpreted as a reward for silence.

The Judicial Investigating Organization is still looking into the human trafficking of prostitutes to Canada in 1999, according to the agents involved.


Secretary Rice says U.S. not trying to destabilize Cuba
By the A.M. Costas Rica wire services

Secretary of State Condoleezza Rice says the United States is ready to assist Cuba in a transition to democracy, but is not attempting to foment unrest on the island while President Fidel Castro is ill.

It has been nearly a week since President Castro temporarily handed executive authority to his brother, Raúl, before undergoing surgery for what government sources described as gastrointestinal bleeding. Since then, Cuban officials have accused the Bush administration of attempting to destabilize the country by repeatedly broaching the subject of political change on the island.

Speaking on NBC's "Meet the Press" program, Secretary of State Condoleezza Rice dismissed the allegation, but reiterated U.S. support for democracy in Cuba. "We are not going to do anything to stoke a sense of crisis, or a sense of instability in Cuba. This is a transitional period for the Cuban people. We are going to stand with them for the proposition that there should not be the end of one dictatorship and the imposition of another dictatorship," she said.

She said her message to the Cuban people is that they have an opportunity to build a stable and more democratic nation.
With heightened U.S. Coast Guard patrols along the Florida Straits, Rice said a mass exodus of Cubans, in her words, "is not to be expected, nor would it be condoned."

In the last week, many Cuban exiles in the United States have expressed excitement and eagerness to return home in a post-Castro era. Asked whether the
United States would allow a reverse-exodus of exiles back to Cuba, the secretary of state had this to say. "Our role will be to help the Cuban people, when the time comes, to have a peaceful and stable democratic transition," she said.

Fidel Castro, who turns 80 next week, has ruled Cuba since leading the island's 1959 Communist revolution. Details of his health are sketchy at best. Cuban officials say the president is recovering well after surgery, and is able to sit up in bed. But a Brazilian newspaper reports Cuban authorities told their Brazilian counterparts that Castro's gastrointestinal bleeding was caused by stomach cancer, a life-threatening disease. Cuban officials deny this.

Those who have wished the Cuban leader a speedy recovery range from U.N. Secretary General Kofi Annan to former Cuban shipwreck survivor Elian Gonzalez, once the subject of a custody battle between relatives in the United States and Cuba.


Mexican election court rules against challenger and rejects recount
By the A.M. Costa Rica wire services

Mexico's top electoral court has rejected a request for a full recount of the country's July 2 presidential election ballots.

The tribunal's seven judges met Saturday to consider allegations of fraud filed by lawyers for Andrés Manuel López Obrador, who narrowly lost the election to Felipe Calderón.
López Obrador had repeatedly called for a vote-by-vote recount of all 41 million votes cast in the election. His supporters staged street protests in Mexico City, causing major traffic blockages in the capital.

The nation's top electoral court has until Sept. 6 to rule on the challenges and officially announce the winner of the election. López Obrador will likely ask his supported to return to the streets.


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