Adriana Castro
Partner - Costa Rica
Commercial activity requires agility to function properly. This means avoiding unnecessary formalities that, rather than providing legal certainty, can become obstacles to the operation of companies.
However, probably because of the overlap between civil and commercial law concepts, the idea that excessive formality offers protection has been steadily taking hold. On that premise, we have seen a series of reforms that seek supposedly greater legal certainty but that, in practice, end up creating complications for how companies operate and, ultimately, undermine the country’s competitiveness. The most recent is the elimination of the proxy for holding shareholders’ meetings.
Costa Rica recognizes several forms of agency, such as the special power of attorney for a specific act, the special power of attorney, the general power of attorney, the general power of attorney with full powers (limited or unlimited) and the judicial power of attorney, through which one person can represent another to carry out certain acts. Each has its own formalities and rules. Nevertheless, the Commercial Code allowed a shareholder or quotaholder to be represented at a shareholders’ or quotaholders’ meeting through a proxy.
This mechanism, traditionally used in commercial practice (including its historical use in insolvency proceedings), involved fewer formalities than powers of attorney and also gave the representative greater discretion. This was no accident: anyone who has taken part in a shareholders’ meeting knows that these meetings rarely follow the agenda to the letter and that unforeseen issues or nuances often come up. In that context, the proxy was ideal, since it allowed for effective and flexible representation in the company’s highest governing body.
With the passage of Law No. 10840, the proxy has been eliminated and representation at meetings must now be granted through a special power of attorney. Although this might seem like a minor change, since a special power of attorney is also a form of agency, in practice it means a significant loss of agility, especially for companies with foreign shareholders or quotaholders.
First, the special power of attorney has become an increasingly formalistic instrument, partly in response to abuses in other areas, particularly real estate. As a general rule, the attorney-in-fact may only perform the acts expressly authorized, which limits their room to maneuver. This is problematic in the context of a shareholders’ meeting, where a certain degree of discretion is essential to adapt to how the discussion unfolds and how consensus is built. Requiring special powers of attorney could make positions within meetings needlessly rigid.
Second, in practice, a proxy instrument could be authenticated more easily (even through witnesses). By contrast, the special power of attorney, and the reform in particular, raise important questions about formal requirements. The reform is not entirely clear about the type of authentication required, although it does refer to authentication by an attorney. This ambiguity creates friction with other rules on document authentication. For shareholders and quotaholders abroad, this may mean having to obtain notarial or legal authentication in their home jurisdiction and then having the document apostilled for use in Costa Rica. Considering that the statutory notice periods for meetings typically range from 8 to 15 days, it is entirely possible for these procedures to take longer than those periods, effectively preventing certain shareholders or quotaholders from participating.
In addition, the special power of attorney must comply with formalities derived from the Civil Code and the Civil Procedure Code, which can create uncertainty for companies when verifying whether the representation is valid. In international settings, this may even require analyzing compliance with requirements under foreign law, adding operational complexity. As a result, companies take on additional burdens to validate the representation of their own shareholders and quotaholders.
The alternatives, such as granting general powers of attorney or general powers of attorney with full powers, are not necessarily efficient either. Granting and registering them may take longer than the notice periods, and they do not solve situations where the appointed attorney-in-fact is unable to attend a specific meeting.
What stands out most is that the proxy, as an established commercial practice, did not cause any significant problems. As with any legal concept, abuses could occur, but the answer is not to eliminate the mechanism. It is to sanction misuse effectively.
While the ideal would be to reconsider the elimination of the proxy, in the short term it will be essential for the interpretation of the law and its eventual implementing regulations to introduce flexibility criteria into the requirements that apply to special powers of attorney in commercial matters. Along those lines, it is key to expressly allow authentication by an attorney, facilitate the use of digital signatures and simplify the mechanisms for verifying representation.
Against this backdrop, it is a welcome development that the Registry of Legal Entities (Registro de Personas Jurídicas), through Circular DPJ-003-2026, has clarified that it is not the Registry’s role to assess the representation of participants at meetings when such representation is evidenced by powers of attorney. This position is a first step in the right direction, as it prevents registry review from becoming an additional barrier. However, it does not solve the practical problems of obtaining and formalizing special powers of attorney.
Ultimately, this reform reveals a broader problem: the tendency to regulate from a place of distrust, imposing additional burdens on those who act properly instead of focusing on sanctioning abuses. Regulations and interpretation must seek to make the rules more flexible in practice.
Commercial Law needs agility to fulfill its purpose. Losing it comes at a cost.
And, in this case, that cost may be greater than the problem it was meant to solve.