Foundations and Panamanian Corporations

The Panamanian Corporations are entities whose constitution involves a brief process before a Notary Public, their subsequent registration with the authority that regulates them, and then their registration before the Revenue Directorate to obtain their key that allows him to invoice.

The most practical uses that you can give to an anonymous society are the following and according to the use will be the regulations and the advice it must receive for its most efficient use:

1. As a company that executes commercial activities within the national territory, where it must obtain additionally a Notice of Operations.
2. As a company dedicated only and exclusively to the sale of goods or provision of services outside the territory of the Republic of Panama.
3. As an entity that is used to own goods.

When setting up a company, it is important that you consider the following:

1. They can be constituted with a single shareholder.
2. It requires at least three directors however a single person can hold all three management positions; President, Secretary and Treasurer.
3. It can be managed from abroad.
4. Information about shareholders is not recorded in the deed of incorporation, however if it is known and guarded by their lawyer.
5. The time of incorporation of a company is five days and all the required forms and documents can be sent electronically.

Additional costs and advice can be provided through your inquiry.

The Foundation of Private Interest or FIP is a legal tool, as would be a public limited company, but for different purposes, which allows us as founders to plan our heritage into the future, under a series of circumstances or events that we ourselves help to define through the document of incorporation and the Regulations that we subsequently develop.

1. REGULAR CLIENTS OF PRIVATE INTEREST FOUNDATIONS

Anyone, who regardless of age, owns money, movable or immovable property, and who wants to ensure two fundamental points:

• That its beneficiaries be able to dispose of these assets immediately after the event that one defines as a generator of these benefits.

• May the founder as a generator of these benefits regulate the delivery and use of them in such a way that the principles of use and enjoyment of who generated them, in this case the founder, are maintained.

On this it is important to note that in our country and in most countries the way for a person’s beneficiaries or heirs to receive these assets after death is through a succession trial that may or may not be preceded by a will, but that in both cases it is essential that this trial be given , which in most cases takes some time (from 6 months to 2 years or more) and while heirs or potential heirs (if not defined in a will) remain in some uncertainty because they cannot dispose of these assets or moneys. With the Private Interest Foundation, this trial is not necessary. The goods pass to their beneficiaries as quickly as the country’s own administrative procedures allow.

2. FEATURES OF THE FOUNDATION

• It operates as a fiduciary figure to make, in a due term or in the face of a pre-established condition (e.g. the death of the founder), a transfer of the assets incorporated into the beneficiaries.

• It may be constituted on movable property, immovable property or rights that are in the Republic of Panama or anywhere else in the world.

• The Private Interest Foundations are exempt from payment of any tax resulting from the acts of incorporation, amendment or dissolution thereof; as well as the acts of transfer or lien of the Foundation’s assets and the income resulting from it.

• The Foundation’s heritage is independent and is not part of the foundation’s heritage (founder). This heritage is free of embargoes and cannot be subject to any action or preventive measure, except if the action or measure relates to the obligations incurred or damages resulting from the execution of the objectives of the Foundation.

• Inheritance laws have no effect on the foundation’s assets.

• The foundation allows to organize the family heritage in such a way that it can be distributed in the life of the Founder according to the family needs. For example, children’s university, among other things.

• One of the most frequent advantages in the use of an FIP is found in the event of the heritage arrangement due to death. The Living Founder disposes of his assets by incorporating them into the Foundation and establishes the ways in which those assets will be disposed of once he dies, transferring himself to the beneficiaries to its fair extent. This method avoids the promotion of long succession processes and the payment of transfer taxes.

3. MAIN FIGURES WITHIN THE FOUNDATION

The Founder: It is the person (natural or legal) who transfers to the Foundation some or all of his estate in order to preserve, administer it and; subsequently, hand it over to one or more Beneficiaries, according to the conditions determined by the Founder in a private document called Foundational Regulations.

The Beneficiaries: The persons (natural or legal) will receive the foundational patrimony, as determined by the Founder in the Regulations.

The Foundation Council: For the administration and management of the Foundation, a Foundation Council, usually three (3) members, is appointed at the time of its establishment. From this body emanate the resolutions that are required for the fulfillment of the purposes that the Founder has determined.

The members of the Council may be nominal at the request of the client. In this case, they are selected by our management team, under the coordination and direction of a partner of the Firm. The address that is assigned is that of our offices in Panama City.

Protector: The Council’s audit tasks are accustomed to a Guard. The Protector may be a signature of Auditors or Accountants, who are given the power to supervise and ensure the correct administration of the Foundation’s assets, in accordance with the will expressed by the Founder. This firm is usually responsible for auditing and reporting to the Founder on a regular basis or upon request.

The designation of the Protector is made in the Foundation Act or after the constitution in a private document.

The Liquidator: The task of liquidation involves the identification and quantification of the final estate, where compliance with a certain condition induces the total distribution of the assets among the beneficiaries. For example, in the case of the Death of the Founder.

The Founder may make a specific liquidator designation in the Foundational Regulations.

The settlement is subject to the distribution rules established by the Founder and are supervised by the Protector. The latter shall have the power to object to and challenge any arbitrary decision contrary to the provisions of the Regulation.

4. ASSETS TO CONTRIBUTE TO THE FOUNDATION’S PATRIMONY

All kinds of goods can be contributed, the most common being;

1. Real estate whose destination or objective is the family and non-commercial, for example the main house of the Founder or a productive farm. It should be noted that the goods can be in Panama or abroad.

2. Shares in Panamanian or foreign companies.

3. Some bank account with specific funds that may be committed to the Foundation’s destiny.

Note: Although the assets or money destined for the Foundation can be moved or transferred, the idea would be for the Foundation to form its assets on well-defined assets or values.

Note 2: The Law of Private Interest Foundations of our country provides in article 14 the following and I quote:

“Article 14: The existence of legal provisions in hereditary matters at the home of the Founder or beneficiaries shall not be opposed to the Foundation, nor shall it affect its validity or prevent the realization of its objectives, in the manner provided for in the Foundation Act or its regulations.”

This is of the utmost importance as there are many doubts about the ability to happen or inherit real estate with this figure in certain countries in our region, which is clear from the presentation of the previous article.

5. OBJECT AND DEVELOPMENT OF THE FOUNDATION REGULATION

The regulation is the document that after having constituted the foundation, allows the founder in an absolutely private way, to define its beneficiaries (which may be natural or legal persons) and the way of distribution of the goods and even their future use under a system of preconditions, for example.

The regulations can be modified by the Founder at any time and it enters actively, for the purposes of the beneficiaries, after the definition of the fact that generates the benefits. Let us remember that this fact may be the death of the founder or any other event that he defines as a generator of benefits.

6. USE, ENJOY AND ENJOY THE GOODS BY THE FOUNDER

The Founder remains in full use, enjoyment and disposition of the goods or values registered or transferred to the foundation at all times.

In order for any Foundation to be operational with respect to third parties or beneficiaries, it is essential that a regulation be drafted according to the wishes of the Founder and that seeks to ensure the succession of goods and money from one person to another through this legal figure.

The regulation can be made later according to the customer’s needs.

RG LEGAL ADVISORS will advise you on everything related to the establishment of a Foundation, the elaboration of its regulations and all the permanent advice that is required for the correct use of this legal figure.

Additional costs and advice can be provided through your inquiry.

In order for a company, which intends to engage in trade activities within the national territory, it must comply with the following steps:

1. Establish a Panamanian Corporation: The traditional way to start a business in Panama, is through the public limited companies, which operate through a Shareholders’ Meeting that delegates its functions to a Board of Directors, which in turn carries out the company’s business. It is very important that you know what activities are limited depending on the nationality of your shareholders, being mainly retail, for which we suggest you consult us on the best way to achieve such businesses.

2. Obtain your RUC and NIT Number: The first is the Single Taxpayer Registry that accompanies a Verifier Digit (DV) is your identification number on the invoices that your company issues and is mandatory throughout your operation. The second is the Tax Identification Number and it is the one that allows you to access the systems of prosecutors of the State and thus have all the information of taxes and obligations up to date.

3. Get an Operation Notice: This will allow you to specifically perform the business activity you want to undertake with details of the location of the business. It is important to note that you should only get this notice when you already have the premises or office ready and you are ready to start the business.

4. Make the link with your respective Municipality: Once you have obtained the Notice of Operation you start your business to be a taxpayer, in addition to the state, of the respective Municipality. It’s important that your business is properly classified so that you pay only business-friendly taxes.

5. Verify the employment and social security situation of your employees: If your company is going to have employees, you must register the employment contracts with the Ministry of Labour and you must open your respective Social Security form, for which you will have monthly obligations with this institution, both to you and the employer, as well as to your collaborators.

6. You must hire an Authorized Public Accountant: Due to the different national and municipal taxes that may arise it is advisable that you are advised by an Accountant, which we can offer you.

All the services we have mentioned are provided by our firm, for which we suggest you consult us about its costs and additional advice.