The Practice Of Factoring In Costa Rica: More About Your Legal Regulations

Author:ERP Lawyers
Profession:ERP Lawyers

Among the financial tools used in our country, factoring in Costa Rica is not something new. This financial process has been in practice for several years and it's quite useful for companies that need to improve their liquidity with urgency to continue operating regularly. Factoring or invoice discounting is a process by which a company, by signing a contract and paying a commission and the corresponding interest rate, finances the total amount of the bills from another company or person, such as invoices, bills of exchange, promissory notes and other similar documents, and then it is responsible to collect them from the debtor once the notification (is an important step that cannot be ignored and that is fundamental to the legality of the process) of such assignment of bills is made. With this option of financing, it is possible to obtain a faster funding with different credit guidelines that can help both SMEs and big companies, converting these credit accounts into cash sales.

This funding mechanism is regulated by Costa Rican laws, specifically by the Commercial and Civil Codes and its suppliers can be any corporation or physical person with legal capacity. In Costa Rica, factoring is regulated by the figure of the assignment of receivables (article 460 and concordant of the Commercial Code). Now, we will proceed to deep on the regulations related to factoring.

Regulations in the Commercial Code

To start regarding the billing document, which is the basis of the process, according to Article 460 of the Commercial Code, "The bill is enforceable against the buyer for the amount overdrawn". "The amount established in the invoice, is presumed true and the signatures authentics." It is very important to emphasize that the bill becomes enforceable only if the buyer, his agent or his manager, when authorized in writing to sign on his behalf, signs it.

These bills will become enforceable, in accordance with Article 460...

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