Rights of Minority Partners
Being classified as a minority partner within a mercantile society, also called a minority shareholder, means that one has less than 50% of the shares. Due to their number of shares minority shareholders cannot exert pressure on company decisions made by the majority shareholder.
The implications of being a minority partner in Costa Rica are not well known, especially by the people who hold a minority position in a company, whether this be a Limited Liability Company or a Public Limited Company. People who serve as minority partners often do not know their rights and tend to think that they do not have any control over the actions of the company.
Law 9392 regulates the Protection of Minority Investors, which aims to protect these partners and proposes regulations for their control. The Law reforms the Civil Code and the Commercial Code to improve the transparency of the business environment in Costa Rica. As part of the modifications to the Codes mentioned above, the minority partners were granted the right to review any documents pertinent to the state of the company.
The Law also authorized the reduction of the quorum percentage required to request an audit of the company. Previously it was 20%, now only 10% of the total share capital is required. Through the modification of these articles, the partner is also allowed to examine procedures such as acquisitions, sales, pledges, or mortgages of registered company assets that equal or exceed 10% of the total assets.
The Law also modified the duty and obligation of the company’s administrators and directors so that the duty of diligence and loyalty must always be in favor of the company and in the interest of the shareholder.
Advising for a minority partner is key because although the Protection Law for Minority Partners was indeed modified to seek greater protection for these kinds of partners, they must make sure that their rights are not violated and that their participation as a partner within the company is fully respected.
