Company Stock Registration in favor of Minors
The purpose of this article is to determine the legality of the transferring or assign of the ownership of registered shares in favor of a minor. Thus we will provide a brief review of the current Panamanian legislation.
We must start from the fact that the Panamanian State understands as legal the acquisition of goods privately, by natural or legal persons. Determine on a Constitutional level, it is engraved the following principle "Private property acquired in accordance with the Law by legal or natural persons is guaranteed.". Also on our Constitution, it is recognized the principle that Individuals are only liable for breaching a previously existing Law. This means that a normal person can do anything that is not formally forbidden by the Law.
Therefore, in order to determine if the ownership of company´s shares by a minor is legitimate and valid, we must identify any restriction in the Law that expressly forbids it.
The Panamanian Civil Code establishes that minors and the handicapped people can acquire possession of things; but they need the assistance of their guardians to use the rights attached to their title.
From the analysis of the aforementioned Law, we can determine that the ownership of property by minors is in fact considered legal, notwithstanding the exercise of the rights emanating from said ownership. Which are restricted to them by the Law and Subrogated in favor of their legitimate representatives, until they reach a legal age.
Once determined the legality of the ownership, on property by minors, we must deepen within the special Law that regulates corporations and the right of shareholders in Panama, in order to determine if there are restrictions on the ownership of shares by minors.
After a deeper analysis we did not find a legal provision that explicitly prohibits a minor from acquiring the ownership of an action, so based on the provisions of the previous points, we consider that acquisition legal, but subject to the restrictions previously described from the Panamanian Civil Code. Nonetheless we were able to find some articles, within the Panamanian Corporation Law that the subscribers of a company are entitled to impose special restrictions on the transfer of the shares of said company, which restrict the transfer of shares to minors of those companies that within its articles of incorporation comprehend a formal and explicit restrictions to under age participation.
After having reviewed the current legislation, from the general scope to the special regulation of the subject, we can reach the following conclusion. Minors can legally be holders of shares of corporations (unless the articles of incorporation of that company forbids it); however they will have restricted the exercise of their rights as shareholders, which will be subrogated in favor of their legal representatives, until they reach the age of majority.
Juan Raúl Sevillano
Pardini & Asociados