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Ease of Doing Business in

Costa Rica

Costa Rica Download Profile (1753.5KB, pdf)
Region Latin America & Caribbean
Income Category Upper middle income
Population 4,807,850
GNI Per Capita (US$) 10,210
City covered San José

190

1

DB 2017 Rank

1

100

DB 2017 DTF (% points)

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Topics DB 2017 Rank DB 2016 Rank info_outline Change in Rank DB 2017 DTF (% points) info_outline DB 2016 DTF (% points) info_outline Change in DTF (% points) info_outline
Overall 62 60 down
2
68.50 68.49 down
0.01
Starting a Business 125 119 down
6
81.57 81.20 up
0.37
Dealing with Construction Permits 53 49 down
4
74.63 74.61 up
0.02
Getting Electricity 27 22 down
5
85.04 85.01 up
0.03
Registering Property 52 52
-
73.39 73.39
-
Getting Credit 7 7
-
85.00 85.00
-
Protecting Minority Investors 165 166 up
1
35.00 35.00
-
Paying Taxes 62 60 down
2
78.98 79.03 down
0.05
Trading across Borders 71 69 down
2
79.32 79.86 down
0.54
Enforcing Contracts 125 125
-
52.41 52.41
-
Resolving Insolvency 107 106 down
1
39.62 39.37 up
0.25

DB 2017 Rank:

107

DB 2016 Rank:

106

Change in Rank:

down1

DB 2017 DTF (% points):

39.62

DB 2016 DTF (% points):

39.37

Change in DTF (% points):

up0.25

Indicator Costa Rica Latin America & Caribbean OECD high income
Recovery rate (cents on the dollar) info_outline 27.2 31.0 73.0
Time (years) info_outline 3 2.9 1.7
Cost (% of estate) info_outline 14.5 16.7 9.1
Outcome (0 as piecemeal sale and 1 as going concern) info_outline 0 .. ..
Strength of insolvency framework index (0-16) info_outline 8 7.1 12.1
  • Indicator Explanation Answer
    Recovery rate (cents on the dollar) 27.2
    Proceeding Mirage would initiate an in-court reorganization proceeding (solicitud de concurso) based on article 709 of the Civil Procedure Code. This procedure would involve the appointment of an insolvency administrator, who will be responsible for the day-to-day business of the company while an agreement is negotiated in-court with the creditors. The most likely scenario is that these negotiations won’t end up with an agreement, and therefore the reorganization procedure would be converted into a liquidation procedure after the Mirage’s bankruptcy declaration is issued by the Court (Article 740 of the Code of Civil Procedure). The sale of the secured assets will occur during this stage. liquidation (after an attempt at reorganization)
    Outcome Insolvency proceeding of liquidation usually involved the end of business operation for the company and the sale of its assets due to the lack of liquidity. Without these assets the company won’t be able to continue with its business operations (Articles 760 and following of the Civil Procedure Code) piecemeal sale
    Time (in years) A reorganization proceeding which is converted into liquidation, similar to the case study, will take about three years. The preparation of the creditors’ claims, the appointment of the insolvency professionals, and the negotiation with creditors during the reorganization stage will last approximately 1.5 years. After this, assuming that there won’t be an agreement with BizBank, the liquidation proceeding will start in accordance with Article 709 Procedure Code. During this stage, the necessary steps towards a judicial sale of the property (inventory preparation, auction, etc.) would take place. The liquidation proceeding would last about 1.5 additional years. This time estimate takes into account a decrease in time to settle in-court disputes in Costa Rica after the creation and full implementation of the Bankruptcy Court in San Jose in 2008, which has reduced the time it takes solve cases like the one at stake from 3.5 to 3 years. 3.0
    Cost (% of estate) The costs associated with the reorganization proceeding which is then converted into liquidation like in the actual case would amount to approximately 14.5% of the value of the estate. The main component of this expenditure would be the attorney’s fees around 10% and fees insolvency representatives around 4% based on article 700 of the Code of Civil Procedure. 14.5
    Answer Score
    Strength of insolvency framework index (0-16) 8.0
    Commencement of proceedings index (0-3) 3.0
    What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for both liquidation and reorganization 1.0
    Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor may file for both liquidation and reorganization 1.0
    What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) Debtor is generally unable to pay its debts as they mature 1.0
    Management of debtor's assets index (0-6) 4.0
    Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor? No 0.0
    Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? No 0.0
    Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0
    Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0
    Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings? Yes 1.0
    Does the insolvency framework assign priority to post-commencement credit? (b) Yes over ordinary unsecured creditors but not over secured creditors 1.0
    Reorganization proceedings index (0-3) 0.0
    Which creditors vote on the proposed reorganization plan? (c) Other 0.0
    Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation? No 0.0
    Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally? No 0.0
    Creditor participation index (0-4) 1.0
    Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative? No 0.0
    Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0
    Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative? No 0.0
    Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims? Yes 1.0

Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”.