By means of Law Decree No. 5 of July 2nd, 1997, the President of Panama in use of his extraordinary legislative powers granted by the Legislative Assembly has established innovative ammendments to our Commerce Code with respect to our corporations, securities and trusts regimes. It is worth mentioning that our General Corporate Law has not been subject to reforms since its enactment in 1927.
The most relevant improvements with respect to corporate matters may be outlined as follows:
A corporation validly constituted under a foreign jurisdiction may submit to Panamanian laws and continue its existence as a Panamanian corporation, notwithstanding its jurisdiction of origin.
This would be accomplished by filing before the Public Registry Office the required documentation to be issued by the competent foreign authority and legalized by Panamanian Consul or by "Apostille".
Once the required documents are registered before the Public Registry Office, the continuance of the corporation under Panamanian laws shall become effective between the parties and with respect to third persons as of the date of initial constitution of the corporation in its jurisdiction of origin. The corporation shall continue with all its assets, rights, privileges, powers and franchises and subject to the restrictions and obligations imposed upon the corporation in accordance with its jurisdiction of origin. Creditors' rights and liens are not affected by the continuance of the corporation under Panamanian laws.
A conditional registration of such continuance is also authorized by Law Decree No. 5 of 1997. The conditional registration would take effect upon the registration of an affidavit in this connection issued by a duly authorized representative of the corporation.
A Panamanian corporation may continue its existence under any other foreign jurisdiction, as long as: a) it is authorized by its articles of incorporation and by-laws; b) it is authorized by such foreign jurisdiction; and c) the corporation is in goodstanding with respect to its tax obligations inPanama.
Evidence of the Panamanian corporation's registration before the foreign jurisdiction must be registered before the Public Registry Office. The Panamanian corporation will continue with all its assets, restrictions and obligations. Likewise, creditor's rights and liens shall not be affected by its continuance under the foreign legislation. The lack of registration of the corporation in the foreign country - duly evidenced - does not affect its constitution in its jurisdiction of origin.
The name of a corporation may be reserved by the Public Registry Office for a period not to exceed 30 days. The reservation fee is US$25.00.
The financial statements of the corporation approved by the Board of Directors or by the partners or shareholders of the corporation, and duly countersigned by a Certified Public Accountant may be registered before the Public Registry Office at the company's option.
Corporations may keep their Minutes and Share Registries by means of books, electronic devices or other mechanisms as authorized by law, as long as the same may be printed. These methods must allow to clearly determine the commercial transactions undertaken.
Juridical persons with offshore operations are not obligated to keep in the Republic of Panamathe required accounting books and records.
The Minutes Registry shall contain the resolutions adopted at the meetings, either by the shareholders, directors or partners. The minutes must indicate the date of the notice or its waiver; the place and date of the meeting and any other relevant circumstances, as well as the names of the persons who acted as President and Secretary of the meeting. Both shall sign the minutes and any of these two may certify the same.
The Share Registry must contain the names of the shareholders, in the event of nominative shares, with indication of the share certificate number; the amount of shares (in numbers of percentage); the amount paid-in for the shares and the nature of the instrument or title accordingly.
Accounting books and records of corporation domiciled in Panama must be kept during the existence of the business and for up to 5 years after closing of business. It is prohibited to move these records outside the country or to a non-accessible location.
Financial statements must reflect annual operations in accordance with generally accepted accounting principles applicable in Panama. Basic financial statements shall include a general balance sheet, an income statement, an assets statement -including change in retained earnings- and a cash flow statement. These statements must be issued within the following 120 days upon closing of the fiscal period and be kept available to tax authorities.
Acts or contracts entered into by phone or fax or by means of electronic communication shall be deemed "as between present parties" if such parties or their representatives or attorney-in-fact have been directly in communication. Likewise, Board of directors' or shareholders' meeting shall be deemed "as between present parties" as indicated above.
For this purpose, a minute must be issued, with indication of the meeting held, the resolutions adopted and the participants have been in communication.
The resolution adopted by directors, shareholders, managers or liquidators of any kind of corporation shall be valid even though these persons had signed the document in different places and dates.
Interests accrued in offshore operations are not subject to provisions pertaining.
Two or more natural or juridical persons may organize a corporation of any kind or one or more of these may be shareholders, directors, officers, managers, attorneys-in-fact or liquidators of the corporation.
Assets contributed to the corporate fund may not be claimed for the payment of personal debts of a partner or shareholder, but by means of a lien in favor of a third party granted before the assets were contributed to the corporation.
The transfer or encumbrance of the corporate assets shall be accomplished by the subscribers, partners, shareholders, managers, directors, attorneys-in-fact or liquidators, as provided by the articles of incorporation or by law, if the articles of incorporation are silent.
Powers of attorney either general or limited shall become effective with respect to third parties as of the date of execution and may be registered before the Public Registry Office at the interested party's option.
Any corporation may grant a general pledge on its assets located outside the Republic of Panama, without requiring delivery to the creditor and without affecting those credits that rank privileged upon certain real estate or chattel properties.
Corporations organized before Law Decree No. 5 of 1997 was in force may abide by these provisions by means of a resolution to be adopted by the shareholders or partners and which must be registered before the Public Registry Office.
With respect of trusts, regulated by Law No. 1 of 1984, the following amendments should be noted:
The signatures of the trustee, the grantor or its attorneys-in-fact for purposes of its constitution in case trust is executed by private instrument, must be authenticated by a Notary Public.
Additional income tax exemptions are granted for trusts established for purposes of housing investment, housing development projects, industrial parks or urban development parks in the Republic of Panama.Tweet
Pardini & Asociados offers you the Guide to Doing Business in Panama completely FREE! Download here!Get it now