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Bank Secrecy legislation
Corporations
BVI Companies
IBC (Amendment) Act 2003
Choosing a Company Name
Getting Started - New Business
Private Interest Foundation
Ship Registration
Panama Embassies
The Apostille
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Panamanian Foundations
In 1995, Panama adopted legislation
establishing and regulating the Private Interest Foundation, modelled on the Liechtenstein
stiftung. It is an excellent vehicle for preservation of assets, with sufficient
flexibility to enable it to be used for family, religious, public or charitable purposes
and to administer, invest or preserve assets for a prescribed class of beneficiaries.
Features & Advantages
 | Anonymity:
Like the Panamanian Corporation, the Private Interest Foundation
provides anonymity to its beneficiaries as well as to the Founder.
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| Arbitration:
The Foundation Charter may provide that any controversy arising in
connection with the Foundation be resolved by arbitration, thus avoiding the public sphere
of litigation. These provisions may also include the location and the procedural rules to
be followed in arbitration.
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| Asset
Protection: The assets of the Foundation cannot be used to satisfy the
debts of the Founder or of beneficiaries, such as divorce proceedings, lawsuits or other
liabilities. Where assets have been transferred to the Foundation and out of the reach of
creditors, claims of fraudulent transfer must be made within three years.
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| Capital
Requirements: A minimum of US $10,000 of assets must be transferred to
the Foundation, although this need not take place immediately following establishment.
There is no public record of the capital amounts other than this minimum transfer, so the
sum of total assets held by the Foundation remains confidential.
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| Confidentiality:
The Foundation Council, Registered Agent and any other person that obtains information
relating to the activities, transactions or operations of the Foundation is required to
keep this strictly secret. In addition to civil liability for actual damages, breaches may
result in imprisonment for up to six months and penalties of up to US$50,000.00.
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| Documents
and Records: There are no requirements to file tax returns or
financial statements. Books and accounting records may be held in Panama or abroad.
Further, the management and operation of the Foundation is not subject to the supervision
of any governmental authority.
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| Estate
Planning Vehicle: A sophisticated and efficient substitute to the
will, the Panamanian Foundation is a perfect vehicle for inter vivos or mortis
causa estate planning, as it can be set up to remain in perpetuity in so far as the
purposes of the Foundation continue to be met. This may prevent hereditary disputes, as
well as avoiding forced heirship rules.
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| Foundation
Council Meetings: It is not necessary to hold annual meetings, nor for
any meeting to be held in Panama.
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| Founders:
The Founder may be one or more natural or legal persons of any
nationality. As the law is curiously silent on the transferability of the Founder’s
rights and obligations, there is nothing to prevent the transfer of these rights and
obligations from a nominee founder as registered in the Foundation Charter to the real
founder by private document. It is possible for the Founder to retain certain controls
with respect to the Foundation, although these should be set out clearly in the
Foundation’s Bylaws.
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| Preservation
and Administration of Assets: The Private Interest Foundation is a
perfect vehicle for the preservation and administration of assets. The Foundation Charter
may limit or prohibit property splitting, property transfers, the mortgaging or using of
property to secure loans or other forms of financing, and regulate the general
administration of the assets or business donated to the Foundation. The Foundation should
be authorised to preserve, administer, and invest the assets consigned to it and to
conclude all commercial and legal transactions necessary to the realisation of its
purposes. The responsibility for day-to-day management lies with the Foundation Council.
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| Revocable:
Although the Foundation is generally irrevocable, there are a limited
number of cases where it is possible to revoke its establishment:
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| Before registration of the Foundation Charter |
| When the Foundation Charter expressly provides for
revocation |
| For any of the Civil Code causes for revoking inter vivos
donations. |
| Tax Advantages:
The assignment, transfer or donation of assets to the Foundation is not subject to any
tax under Panamanian law, neither is the organisation, modification or dissolution of the
Foundation. Provided it meets general requirements, income generated by assets of the
Foundation is not subject to taxes, contributions, rates or liens of any kind. |
Purposes of the Foundation
Foundations may be established for any one,
or various, of the following purposes:
| Asset
Protection: to protect assets against excessive taxation, creditor
claims, political instability or forced heirship rules.
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| Business:
to manage profit sharing or pension plans for employees; to hold shares,
participation or interests in private or public companies; a vehicle for the collection of
royalties. It can engage in commercial transactions where the proceeds of such are
dedicated exclusively to the non-commercial purpose or objectives of the Foundation.
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| Charitable
Purposes: to carry on scientific, philanthropic, religious,
humanitarian or educational purposes, or to manage funds or assets for such purposes.
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| Family:
to protect closely held businesses, providing continuity into second and
third generations by preventing property-splitting; to protect minors or disabled persons
or those incapable of managing their own assets; to manage payments of income or
distribution of assets to family members or to provide for their education, housing, or
maintenance.
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| Investment:
to invest in shares, bonds, mutual funds, bank deposits or other assets; to own real
estate or other assets of considerable value such as art work.
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Assistance with
Structuring:
Shirley & Associates understands that
the purposes for establishing a Private Interest Foundation are varied. In some cases, a
client’s needs may not be suited simply with a Foundation "off the shelf".
Attorneys are available to meet with clients to draft the necessary provisions of the
Foundation Charter and the subsequent Bylaws (known as "the Regulations") to
ensure that the Private Interest Foundation is established in accord with the specific
needs of each client.
The Foundation Charter
The Foundation Charter, which must be
registered, should contain the following information:
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details of the Foundation:
Name of the Foundation; its address; the
duration – whether perpetual or limited; name and address of the Foundation’s
Registered Agent, which must be a Panamanian law firm or lawyer; and the initial endowment
of the Foundation (at least US$10,000).
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| Details
of the Foundation Council: including addresses. Only one member is
required if the Council consists of a legal person, but if natural persons are appointed,
a minimum of three are required.
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| Purpose
of the Foundation: this may be stated generally and then detailed
further within the Bylaws.
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| Beneficiaries:
identifying the beneficiaries or the method for determining them (through the Bylaws).
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| Other
matters: the use to be made of the Foundation’s assets and the
manner in which the estate is to be distributed or liquidated in the event of dissolution;
reservation of the right to modify the Foundation Charter (this is not required by law,
but Shirley & Associates recommends that this discretion be maintained); any other
lawful clauses deemed expedient.
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The Foundation Bylaws
In addition to the Foundation Charter,
Shirley & Associates can prepare the Regulations or Bylaws of the Foundation, wherein
the following issues may be detailed: the naming or appointment of regulatory bodies, such
as auditors, the protector, etc; functions and attributes of the Foundation Council;
causes for removal of the Foundation Council; names of the Beneficiaries or methods for
determining the same; and the nature of the distribution to be made to Beneficiaries.
Ongoing
Services
Shirley & Associates is pleased to
offer its assistance following establishment of the foundation, to ensure that the maximum
potential of the Foundation is realised.
Prepared by Beth Anne Gray
J., LL.B. (Hons)
Other articles: Summary
of Private Foundations; An Introduction to
the Panama Foundation.
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