Panama
Corporation Law
Panama
Corporate Law Corporations in Panama are governed by Law 32 of February 26, 1927. Two or more persons of legal age, not necessarily Panamanian citizens or residents of the Republic of Panama, may form a corporation for any lawful purpose. It is not necessary that the capital be even
partially held by Panamanians. Under Panama's Corporation Law it is possible to organize
a corporation owned by only one person. Subscription to all or any percentage of the capital stock is not required. It is
acceptable for incorporators to agree to the subscription of stock shares. The usual practice is to state that each incorporator
agrees to subscribe to one share each.
Law 32 of 1927 requires a minimum of three officers(a president, a treasurer,
and a secretary) and three directors. However, one person may hold two or more offices. It is not necessary that the directors
or officers be Panamanian nominees or shareholders. Finally, it is not even necessary for the interested parties to be present
in Panama for the purpose of organizing a corporation.
The major advantages of a Panamanian Corporation can be summarized as follows:
The freedom to appoint directors and officers of a any nationality and country of residence.The freedom to appoint
nominee directors and officers (provided by by our associates in Panama).The legal protection afforded for the
confidentiality of business and banking transactions. The tax exemption status provided to offshore companies.The complete
anonymity afforded to owners of Panamanian Corporations through the use of bearer shares of stock.The freedom of capital movement
in and out of Panama and the absence of regulatory supervision. The absolute confidentiality
of banking transactions under accounts belonging to corporations with nominee directors and bearer shares in the hands of
the owner.
According to Panama's Corporation Law 32 of 1927 ("the Panama Corporation Law"),
corporations may be created by any two persons of any nationality. The Panama Corporation Law is based on the Delaware Business
Corporation Law of 1926. Unlike the laws of many offshore jurisdictions, there is no difference between domestic and offshore
companies in Panama. All corporations pay taxes only on income derived from Panama.
Panamanian Law requires a minimum of three (3) directors and three (3) officers. These three
directors may also act as officers of the company i.e. President, Secretary and Treasurer, or other positions as desired.
Directors and officers need not be shareholders and they may be non-resident aliens. Directors may be companies or natural
persons. Nominee Directors are provided by Maritime International Ltd. if desired, at no additional cost.
The following names may not be used without a licence or special permission:
Bank, Building Society, Savings, Insurance, Assurance, Re-Insurance, Fund Management,
Investment Fund, Trust or their foreign language equivalent.
All Panamanian corporations must end with the suffix
"Corporation", "Incorporate", "Sociedad Anonima" or the abbreviations "Corp". "Inc"
or "S.A". They may not end with the suffix Limited or the abbreviation Ltd.
The standard authorised share
capital is US $10,000 divided into 100 common voting shares of no par value. The capital may be expressed in any convertible
currency. The minimum issued capital is either one share of no par value or one share of par value. Higher capitalization
requires higher government fees.
The advantages
of incorporating in Panama are:
Total secrecy and anonymity, protected by statute.No requirement to disclose beneficial owners.No
requirement to file annual return/financial statements or hold annual general meetings of shareholders or directors. Full
exemption from taxation on any business activity or transaction carried on outside of Panama.
Reasonable formation and maintenance costs and fees.No minimum nor maximum capital requirements.Minimum registration fee on
capital.
Corporations may engage in any lawful business in any country and may carry on transactions in whatever
currencies they choose. Companies may issue Registered or Bearer shares, preferred shares and non-voting shares. The
shareholders, directors and officers may be of any nationality and may be residents of any country. Neither the directors
nor the officers need be shareholders. Shareholders and/or directors may hold their meetings in any country and they may attend
such meetings by proxy.
General Information:
The Republic of Panama, with
an area of approximately 76,900 square kilometres, is located between Costa Rica and Colombia, and
forms the narrowest and lowest portion of the Isthmus that links North and South America. The population
of Panama is approximately 3.1 million, about 52 percent of which is
urban, and Spanish is the official and spoken language. English is also spoken widely in urban areas and is used daily in
commerce and international trade.
The Isthmus of Panama was discovered in 1501 by Rodrigo de Bastidas who played
a leading part in the establishment of Santa Maria La Antigua del Darien in 1510; the first permanent settlement on the mainland
of the Americas. In 1513, Balboa led an expedition, in Panama, that discovered the Pacific Ocean. Panama City was founded by Pedro Arias Davila on 15th August 1519, almost a
hundred years before Jamestown, the first permanent English settlement in North America was founded.
Panama was a Spanish colony until 1821 when it became part of the Gran Colombia of Simon Bolivar. In 1903,
Panama broke its alliance with Colombia and became an independent republic.
Government:
There are free and
democratic elections with universal suffrage. The executive branch of the goverment is at present composed of a President
and one Vice- President, elected for a five year term by direct election.
Legal Structure:
The legal system
is based on Spanish Civil Law with many Common Law influences; particularly regarding Company Law which is based on the Delaware model. Generally, corporations are incorporated under the Corporation Statute Law 32 of the
1927 Commercial Code. Panama Private Interest Foundations
The PIF vehicle is relatively new in Panama, becoming law in 1995, but the Foundation
concept has existed in Liechtenstein for many years, and, although based upon the well established Liechtenstein legislation,
the Panamanian structure has additional attributes, and is more flexible.
A Foundation is generally used to hold
cash, investments and shares in private, commercial, or holding companies, particularly with a view to Estate planning; in
which area it is an eminently suitable vehicle. Beneficiaries can validly include the Founder, family members, third parties
or institutions. The Founder or client may generally retain
full control over the assets held by the Foundation throughout his lifetime, and the Founder may at all times amend his disposition
or dissolve the Foundation; the Foundation Council may be required by the Regulations to act only upon the First Beneficiary's
instructions.
Protected Confidentiality:
The Panamanian law on Foundations imposes strict sanctions on the members of
the Foundation Council and associated bodies, as well as on any private or public employees, which may have any knowledge
of the activities, transactions, or operations of a Foundation in case of any unwarranted breach of confidentiality. These penalties are without prejudice to any corresponding civil liability. This implies
that, as a matter of law, all information regarding a Foundation is strictly the property of the Foundation itself, no unauthorized
parties having access to same, and any knowledgeable persons being liable to sanctions should any information regarding the
Foundation be unduly shown to others. Therefore, access to documentation regarding the Foundation is strictly limited, which
may not be the case in Foundations established in other jurisdictions.
Panama PIFs can usually be created for around
US$950.00, while the cost of a Liechtenstein Foundation may exceed US$10,000.00 while offering no advantage to justify the
extra expense. In Panama, the annual PIF maintenance is similarly less costly than Liechtenstein.
The PIF can be created by three or more natural persons or by a juridical entity, such
as a corporation. The founder can be nominee. A foundation charter is created, which in essence, is similar to IBC incorporation,
and like IBC incorporation documents, the foundation charter document is public record.
The Foundation is directed
by a Council of three or more members which can also be nominee. In addition, like a trust, a private protector may be named
to have special oversight authority. The client may wish to take this position, especially if nominee council members are
being used. The position of 'Protector' is not required, but it is advisable. The
position of protector can be applied by private agreement between the Foundation and the person acting as protector, but there
is extra protection for the client if the position is spelled out in the foundation charter.
Panama Private Interest Foundation Charter Requirements:
Name of the Foundation - The name of the
foundation can be expressed in any language, but must contain the term 'foundation' as part of the title to indicate that
the entity is in fact a foundation structure.
Initial Patrimony
- The initial patrimony is the amount used to fund the foundation. The foundation can be funded in any currency, but the initial
patrimony cannot be less than the equivalent of US$10,000.00. The initial funding or contribution does have to be done at
the time the foundation is created. There is no public record of the foundation assets other than the fact it was originally
funded with ten thousand dollars.
Council Members - The
foundation structure must have a minimum of three council members who are natural persons, or a juridical person, such as
a corporation that has three directors. The names and addresses of the council members is public record.
Purpose of the Foundation - The foundation may be created for any lawful purpose,
such as the maintenance and welfare of minor children, a college tuition or scholarship funding for any person, the maintenance
and welfare of the founder upon his or her retirement, the maintenance of a building or property, the benefit of any charitable
foundation or organization, or any other purpose the founder desires within the confines of the law.
Beneficiaries - Like a trust document, the foundation structure must name beneficiaries
and the basis of distribution entitlement for each beneficiary. The foundation charter must also indicate the manner in which
any assets are to be disposed of upon its dissolution. The founder of the foundation, or the client, may be named as a beneficiary.
Domicile - The domicile of the foundation can be located
or indicated as any desired jurisdiction, but IMT suggests that Panama, or another 'civil' law jurisdiction, be used. Resident Agent - The foundation
must have a local Resident Agent which is ordinarily a duly authorized lawyer or law firm, with a physical presence in Panama.
Foundation Duration
- The foundation can have a specified life span if the client so desires.
Practical
Uses:
The
practical uses and strategies possible through the PIF are many, and for asset protection, there is probably no better entity
available in any jurisdiction at this time.
Assets placed in a PIF are sole and separate property and cannot be seized or attached to satisfy
the personal debts, or judgments, including divorce judgments, or lawsuits, or any other liabilities, or obligations of the
founder or the beneficiaries.
Although a PIF cannot technically engage in business activities, it can be used
through the beneficial owner of the shares of onshore, or offshore, companies engaged in business activities. It is also permissible
for the PIF to engage in any activity, which will increase the value of its assets. The PIF can own bank accounts, securities, brokerage accounts and real estate holdings, and since there are no ownership
shares in a PIF, the founder does not own the foundation, and thereby may benefit in areas such as tax reporting and asset
protection.
