The Impossibility of Automatic Transfer of Corporate Shares

The Impossibility of Automatic Transfer of Corporate Shares Upon Death in Costa Rica, without a Will or Living Trust.

Published: May 1, 2025
By: Frank Molinero, Esq., LandCo Law

In Costa Rican corporate practice, shares in a sociedad anónima (SA) or sociedad de responsabilidad limitada (SRL) are embodied in títulos valores—negotiable instruments that evidence ownership interests. Unlike simple contractual rights, these instruments are treated as movable goods under Costa Rican law, which imposes strict formal requirements on their transfer.

This blog examines why any attempt by a shareholder to arrange for automatic transfer of shares upon death, whether by private agreement among shareholders or by stand-alone document, is void ab initio unless properly incorporated into a testamentary instrument or living trust and recorded in the corporate books.

1. Legal Nature of Shares as Títulos Valores

Under Costa Rica’s Código de Comercio (Commerce Code), shares are issued in certificated form and qualify as títulos valores, akin to promissory notes or bearer instruments. They embody:

• Literalité: The rights are inseparable from the physical certificate, applicable only for shares in a S.A.
• Legitimatio: The lawful holder of the certificate has prima facie entitlement to the shares.
• Circulation: Transfer may only occur by endorsement and delivery, in accordance with corporate by-laws.

Because shares are movable goods, their succession falls under the rules governing the transmission of chattels, not mere contractual stipulations among co-owners. Furthermore, any purported inter vivos arrangement dealing with title upon future death—outside recognized succession mechanisms—is incompatible with the formal regime of títulos valores.

2. Requirement of Testamentary Incorporation

2.1 Inclusion in a Will

A shareholder who wishes to direct disposition of their share certificates upon death must incorporate such directions into a valid Will, executed with the formalities prescribed by the Código Civil (civil code). Absent testamentary integration:

• The certificate remains part of the deceased’s estate.
• Transfer requires the opening of succession (“proceso de sucesión”) and judicial or notarial adjudication.

2.2 Validity of Living Trusts

Alternatively, shares may be transferred via a fideicomiso testamentario (Living Trust) established in compliance with the law. A Living Trust allows a settlor to designate beneficiaries and trustees, enabling automatic transfer of assets without probate. However:

• The trust agreement must clearly identify the share certificates.
• The certificates must be deposited with the trustee or custodian.

For detailed guidance on structuring living trusts in Costa Rica, please visit our services page on Living Trusts.

3. Nullity of Automatic Transfer Agreements

Any clause in a shareholders’ agreement or private contract purporting to effect the transfer of share certificates automatically upon the death of a shareholder, without:

1. Incorporation into a will or trust, and
2. Formal endorsement and delivery of the certificate,

is null and void. Such agreements conflict with the principle that títulos valores cannot be transferred by mere contractual intent. Attempts to circumvent this rule expose the parties to:

• Uncertainty in the shareholder register.
• Potential claims by heirs under succession law.
• Corporate irregularities leading to liability for directors and officers.

4. Recording and Custody of Share Certificates

4.1 Mandatory Registration in the Shareholders’ Book

Even a valid testamentary disposition or trust must be reflected in the corporation’s Libro de Registro Accionistas or Libro de Registro de Cuotistas (shareholders’ book). Under Article 168 of the Código de Comercio:

“No puede alguien considerarse accionista sino una vez inscrito como tal en el libro correspondiente.”

Thus, any disposition not recorded is ineffective against the corporation and third parties. For procedures on maintaining corporate books and certificates, see our our service called KEEPUP.

5. Practical Recommendations

• Engage in proactive succession planning: Draft or update your will to include share transfers.
• Consider a living trust for streamlined administration and privacy.
• Ensure proper record-keeping: Deliver endorsed certificates and complete book entries promptly.
• Review shareholder agreements: Remove any invalid “automatic transfer on death” clauses.
• Seek specialized legal counsel: Complex estates or multi-jurisdictional interests require expert structuring.