LAW REGULATING PRIVATE FOUNDATIONS
PANAMA
LAW NO. 25
June 12, 1995
"Whereby Private Foundations are regulated"
THE LEGISLATIVE ASSEMBLY
DECREES:
Article 1.
One or more natural or juridical persons by themselves or through
third parties, may create a private foundation in accordance with the
provisions set forth in this law. For such purposes, the endowment of
a patrimony exclusively dedicated to the objectives or purposes
expressly stipulated in the foundation charter is required. The
initial patrimony may be increased by the creator of the foundation,
hereinafter called the founder, or by any other person.
Article 2.
Private foundations shall be governed by the foundation charter and
its regulations, as well as by the provisions of this law and other
legal or regulatory provisions that may be applicable. The provisions
of Title II of Book I of the Civil Code shall not apply to these
foundations.
Article 3.
Private foundations shall not be for profit. However, they may carry
out mercantile activities in a non-habitual manner or exercise the
rights deriving from titles representing the capital of mercantile
corporations that make up the patrimony of the foundation, provided
that the economic results or proceeds of such activities be dedicated
exclusively for the purposes of the Foundation.
Article 4.
Private foundations may be constituted to become effective at the time
of constitution or after the death of its founder, by anyone of the
following methods:
a) Through a private document, executed by the founder, whose
signature must be authenticated by a notary public at the place of
constitution.
b) Directly before a notary public at the place of constitution.
Whichever may be the method of constitution, it must comply with the
formalities established in the present Law, for the creation of
foundations.
In case of a foundation being created either by public or private
document, to have effect after the death of the founder, the
formalities stipulated for the execution of testaments shall not
apply.
Article 5.
The foundation charter shall contain:
1. The name of the foundation, expressed in any language with
characters of the Latin alphabet, which shall not be equal or similar
to that of a foundation previously existing in the Republic of Panama,
80 as to avoid confusion. The name must include the word "foundation"
to distinguish it from other natural or juridical persons of a
different nature.
2. The initial patrimony of the foundation, expressed in any currency
of legal tender that in no case shall be less to a sum equivalent ten
thousand Balboas (B/10,000.00) =U.S. Dollars .
3. A complete and clear designation, of the member or members of the
Foundation Council, to which the founder may belong, including their
addresses.
4. The domicile of the foundation.
5. The name and address of the Resident Agent of the foundation in the
Republic of Panama, which shall be an attorney or a law firm, who must
countersign the foundation charter prior to its registration at the
Public Registry.
6. The purposes of the foundation.
7. The manner in which the beneficiaries of the foundation shall be
designated, among which the founder may be included.
8. The reservation of the right to amend the foundation charter
whenever deemed convenient;
9. The duration of the foundation.
10. The destination to be given to the assets of the foundation and
the method of liquidation of its patrimony in case of dissolution;
11. Any other lawful clause that the founder may deem convenient.
Article 6.
The foundation charter, as well as any amendment thereto must be
written in any language with characters of the Latin alphabet, and
must comply with the regulations for the registration of acts and
titles in the Public Registry; for which purpose it must be previously
protocolized by a notary public of the Republic (of Panama). If the
foundation charter or its amendments are not written in the Spanish
language, they must be protocolized together with their (Spanish)
translation by an authorized public translator of the Republic of
Panama.
Article 7.
Any amendment to the foundation charter, when permitted, shall be
carried out and executed in accordance with what is established
therein. The respective agreement, resolution or act of amendment
shall contain the date on which it was carried out and the name,
clearly identifiable, of the person or persons subscribing it and
their signatures which shall be authenticated by a notary public of
the place where the document is executed.
Article 8.
Every private foundation must pay a registration fee and an annual
maintenance tax equivalent to those established for corporations in
Articles 318 and 318A of the Fiscal Code. The procedure and method of
payment, the surcharge for late payment, the consequences for lack of
payment and all other complementary provisions of the aforementioned
legal principles, shall be applied to private foundations.
Article 9.
The registration at the Public Registry of the foundation charter
shall bestow upon the foundation juridical personality without the
need for any other legal or administrative authorization. Besides, the
registration at the Public Registry constitutes a means of publicity
before third parties.
Consequently, the foundation may acquire and own assets of any kind,
incur obligations and be a party to any type of administrative and
judicial proceedings in accordance with applicable legal provisions.
Article 10.
Once the foundation has obtained its juridical personality, the
founder or third parties that have pledged to contribute assets to the
foundation, on their own or at the request of any person with interest
in the foundation, shall formalize the transfer to the foundation of
the assets so pledged. When the foundation is constituted to be
effective upon the demise of the founder, it shall be deemed to have
existed prior to such death, in respect to the donations that he (she)
may have made to the foundation.
Article 11.
For all legal purposes, the assets of the foundation shall constitute
a separate patrimony from the personal assets of the founder.
Therefore they cannot be sequestered, embargoed or subject to any
precautionary action or measure, except for obligations incurred, or
for damages caused by virtue of fulfilling the purposes and objectives
of the foundation, on behalf of the legitimate rights of its
beneficiaries. In no case shall the assets respond for personal
obligations of the founder or of the beneficiaries.
Article 12.
Foundations shall be irrevocable, except in the following cases:
a) When the foundation charter has not been registered at the Public
Registry;
b) When the opposite is expressly established in the foundation
charter.
c) For any of the causes of revocation of donations.
The transfers (of assets) made to foundations shall be irrevocable by
whoever has made the transfer, unless the opposite is expressly
established in the act of transfer
.
Article 13.
In addition to the provisions of the previous article, when the
foundation has been created to be effective after the demise of the
founder, the latter shall have the exclusive and unlimited right to
revoke it.
The heirs of the founder shall not have the right to revoke the
creation or the transfers, even if the foundation has not been
registered in the Public Registry prior to the demise of the founder.
Article 14.
The existence of legal provisions in inheritance matters in the
domicile of the founder or of its beneficiaries, shall not be
opposable to the foundation, nor shall it affect its validity, or
prevent the fulfilment of its objectives as provided for in the
foundation charter or its regulations .
Article 15.
The creditors of the founder or of a third party shall have the right
to dispute the contributions or transfer of assets in favour of a
foundation, when the transfer constitutes an act of fraud to the
creditors. The rights and actions of such creditors shall prescribe
three (3) years from the date of the contribution or transfer of the
assets to the foundation.
Article 16.
The patrimony of the foundation may originate from any lawful business
and may consist of present or future assets of any nature. Periodic
sums of money or other assets may also be incorporated to the
patrimony by the founder or by third parties. The transfer of assets
to the patrimony of the foundation may be effected by public or
private document. Nevertheless, in the case of real estate, the
transfer must conform with the rules for the transfer of real estate.
Article 17.
The foundation should have a Foundation Council, whose duties or
responsibilities shall be established in the foundation charter or in
its regulations. Unless it be a juridical person, the number of
members of the Foundation Council hall not be less than three (3).
Article 18.
The Foundation Council shall be in charge of carrying out the purposes
or objectives of the Foundation. Unless otherwise stated in the
foundation charter or its regulations, the Foundation Council shall
have the following general obligations and duties:
1. To administer the assets of the foundation, in accordance with the
foundation charter or its regulations.
2. Enter into acts, contracts or lawful businesses that may be
suitable or necessary to fulfil the object of the foundation, and to
include in such contracts, agreements and other instruments or
obligations, such clauses and conditions as are necessary and
convenient, which conform to the purposes of the foundation and are
not contrary to the law, to morals, to bonus mores or to public order.
3. To inform the beneficiaries of the foundation of the patrimonial
situation of the latter, as established in the foundation charter or
its regulations.
4. To deliver to the beneficiaries of the foundation the assets or
resources set up in their favour by the foundation charter or its
regulations.
5. To carry out all such acts or contracts which are permitted to the
foundation by the present Law and other applicable legal or regulatory
provisions.
Article 19.
The foundation charter or its regulations may provide that the members
of the Foundation Council may only exercise their powers by obtaining
previous authorization of a protector, a committee or any other
supervisory body, appointed by the founder or by the majority of the
founders. The members of the Foundation Council shall not held liable
for the 1088 or deterioration of the assets of the foundation, nor for
any damages or prejudice caused, when said authorization has been duly
obtained.
Article 20.
Unless otherwise provided for in the foundation charter or its
regulations, the Foundation Council must render an accounting of its
activities to the beneficiaries and, when applicable, to the
supervisory body. If the foundation charter or its regulations
stipulate nothing in this regards, the rendering of accounts must be
done annually. If the accounts 90 rendered are not objected within the
term established in the foundation charter or its regulations, in lack
of it, it shall be deemed as having been approved within ninety (90)
days from the day it was received, for which purpose, record of this
term shall be made in the report rendering the accounts.
Such period having lapsed or the account approved, the members of the
Foundation Council shall be exempted from liability for their
administration, unless they had failed to act with the diligence of a
bonus paterfamilias. Such approval does not exonerate them before the
beneficiaries or third parties having an interest in the foundation,
for damages caused due to gross negligence or fraud in the
administration of the foundation.
Article 21.
In the foundation charter the founder may reserve for himself/herself
or for other persons, the right to remove the members of the
foundation Council, as well as to appoint or add new members.
Article 22.
When the foundation charter or its regulations do not establish
anything in respect to the right to and the causes for removal of the
members of the Foundation Council, these may be judicially removed,
through summary proceedings, for the following causes:
1. When their interests are incompatible with the interests of the
beneficiaries or the founder.
2. If the administration of the assets of the foundation lacked the
diligence of a bonus paterfamilias.
3. If they are convicted for a crime against private property or
public faith. In this case, while the criminal proceedings are in
progress, the temporary suspension of the member on trial may be
decreed.
4. For incapacity or impossibility to carry out the objectives of the
foundation, from the time such causes may arise.
5. For insolvency or bankruptcy proceedings.
Article 23.
The founder and beneficiary or beneficiaries may request the judicial
removal of the members of the Foundation Council. Should the
beneficiaries be disabled or under age they may be represented by
whoever exercise upon them the "patria potestas" or guardianship, as
the case may be.
The judgement of the court decreeing the removal, shall appoint new
members in replacement of the previous ones, who shall be persons with
sufficient capacity, competence and good moral standing to administer
the assets of the foundation, in accordance with the purposes
established by the founder.
Article 24.
The foundation charter or its regulations may provide for the
constitution of supervisory bodies, that may be constituted by natural
or juridical persons, such as auditors, protectors of the foundation
or others.
The duties of the supervisory bodies shall be established in the
foundation charter or its regulations and may include, among others,
the following:
1. To ensure the fulfilment of the purposes of the foundation by the
Foundation Council and (to protect) the rights and interests of the
beneficiaries;
2. To demand from the Foundation Council, the rendering of accounts;
3. To modify the purposes and objectives of the foundation, if and
when they become too costly or impossible to fulfil.
4. To appoint new members of the Foundation Council due to temporary
or permanent absence or for expiration of the period of anyone of
them.
5. To appoint new members of the Foundation Council in cases of
temporary or accidental absence of anyone of them.
6. To increase the number of members of the Foundation Council.
7. To approve the acts adopted by the Foundation Council, as indicated
in the foundation charter or its regulations.
8. To guard the assets of the foundation and observe their application
to the uses or purposes stated in the foundation charter.
9. To exclude beneficiaries of the foundation and to add others in
accordance with the provisions of the foundation charter or its
regulations.
Article 25.
The foundation shall be dissolved due to:
1. Reaching the day in which the foundation must terminate, in
accordance with the foundation charter.
2. The fulfilment of the purposes for which it was constituted or if
their fulfilment becomes impossible.
3. Being in a state of insolvency, cessation of payments or due to
bankruptcy proceedings having been declared judicially.
4. The loss or total extinction of the assets of the foundation.
5. Its revocation.
6. Any other cause established in the foundation charter or in the
present Law.
Article 26.
Every beneficiary of the foundation may contest any acts of the
foundation that may damage the rights conferred upon him/her,
denouncing such circumstance to the protector or to other supervisory
bodies, if any; or lacking them, directly promoting the respective
judicial claim, before a competent court of the domicile of the
foundation.
Article 27.
The acts of constitution, amendment or extinction of the foundation,
as well as the acts of transfer, transmittal or encumbrance of the
assets of the foundation and the income derived from such assets or
any other act in connection therewith, shall be exempt from all taxes,
contributions, duties, liens or assessments of any kind or
denomination, provided that such assets are:
1. Assets located abroad.
2. Money deposited by natural or juridical persons whose income is not
derived from Panamanian sources nor taxable in Panama for any reason
whatsoever.
3. Shares or securities of any kind, issued by corporations which
income is not derived from Panamanian sources or when such income is
not taxable for any reason whatsoever, even when such shares or
securities be deposited in the Republic of Panama.
The acts of transfer of real estate, titles, certificates of deposit,
securities, money or shares, carried out in fulfilment of the purposes
or objectives, or for the extinction of the foundation, in favour of
relatives within the first grade of consanguinity and of the spouse of
the founder, shall also be exempted from all taxes.
Article 28.
Foundations constituted in accordance with a foreign law may become
subject to the provisions of this law.
Article 29.
Foundations referred to in the previous article that opt to become
subject to the provisions of this Law, shall present a Certificate of
Continuation, issued by such bodies as their internal regime may call
for, and which shall contain:
1. The name of the foundation and the date of its constitution.
2. Data about its registration or deposit (of the charter) at its
country of origin.
3. An express declaration of its desire to continue its legal
existence as a Panamanian foundation.
4. Requirements stipulated under Article 5 of this Law, for the
constitution of private foundations.
Article 30.
The certification containing the resolution of continuation and other
requirements mentioned in the preceding paragraph must have the
following documents attached there to:
1. Copy of the original act of constitution of the foundation
expressing its desire to continue in Panama, along with any subsequent
amendment;
2. A power of attorney granted to a Panamanian attorney to carry out
the necessary proceedings to make effective the continuation of the
foundation in Panama.
The certificate of continuation, as well as the documents attached
thereto referred to in this Law, shall be duly protocolized and
registered at the Public Registry so that the foundation may continue
its legal existence as a private foundation in the Republic of Panama.
Article 31.
In the cases foreseen in Article 26, the responsibilities, duties and
rights of the foundation acquired prior to the change or domicile or
legislation, shall continue in force, as well as the proceedings
already initiated against it or those that the foundation may have
promoted, without being affected such rights and obligations due to
the change authorized by the aforesaid legal provisions.
Article 32.
The foundations constituted in accordance with this Law, as well as
the assets comprising its patrimony, may be transferred or become
subject to the laws and jurisdiction of another country, as may be
provided by the foundation charter or its regulations.
Article 33.
Registrations related to private foundations shall be effected at the
Public Registry in a special section that shall be named "Section of
Private Foundations" The Executive Branch through the Ministry of
Government and Justice shall issue the regulations applicable to such
section.
Article 34.
To avoid the unlawful use of private foundation, all legal provisions
contained in Executive Decree No. 468 of 1994 and any other rule in
force aiming at fighting money laundering derived from
drug-trafficking, shall apply for their operation.
Article 35.
The members of the Foundation Council, of the supervisory bodies, if
any, as well as the public or private employees who might have any
knowledge of the activities, transactions or operations of the
foundations shall at all times maintain secrecy and confidentiality in
this respect. Infringement of this shall be penalized with six (6)
months imprisonment and a $50,000.00 fine without prejudice of the
corresponding civil liability.
The provisions of this article shall apply without prejudice of the
information which must be disclosed to the official authorities and of
the inspections that they must carry out in the manner established by
the law.
Article 36.
Any controversy for which there is no special procedure in this Law,
shall be resolved through summary proceedings.
The foundation charter or the regulations of the foundation may
establish that any controversy arising in respect to the foundation
shall be resolved by arbiters or arbitrators, as well as establish the
procedure they should abide by. In the event that such procedure is
not established, the rules in respect to such matters, as contained in
the Judicial Code, shall apply.
Article 37.
This law shall be effective from the date of its publication.
Fees for complete packages (full service)
The following services are included in our complete packages:
Forming of the company, entry in the commercial register of the
country, apostille, notarially certified translations of certificates
into English, unless official language
-
Nominee director:
An attorney in the formation country will act as nominee director of
the company (to the outside) and transfers all rights and
obligations internally to the actual beneficiary (notarial deed of
trust). The director does not have any account authority.
-
Nominee shareholder:
a tax office in the formation country will act as nominee
shareholder (to the outside) of the company and transfers all rights
and obligations internally to the actual beneficiary (notarial deed
of trust).
-
Domicile of the company in the formation country:
deliverable postal address, availability by telephone, telephone and
fax, mail forwarding service
-
Account opening:
bank account for the company at a renowned major bank in the
formation country, internet banking, VisaCard and cheques. Only the
founder of the company is authorized to have access to the account.
-
General power of attorney to the founder:
Only the founder receives a notarially certified general power of
attorney for the company.
-
Recommendation of a renowned tax office
in the formation country, for book-keeping
and accounting
-
Internet-homepage of the company
hosted on a server in the formation country: 5 pages for
presentation of services/products, feedback form, imprint, e-mail
address. May be extended at any time.
The fees for the complete packages include the services mentioned
above; any special services (nominee director and shareholder,
domicile) are paid for one year.
anonymity 
Corporation (Sociedad Anonima)