Panama companies and Financial Structures

Panama Corporation (Sociedad Anonima)

An offshore company is usually formed as a Panama corporation or “Sociedad Anonima”.
These types of companies are formed under the Law No. 32 of 1927 and the Commercial Code. A corporation is formed by two subscribers who execute the Articles of Incorporation before a notary and then record them at the Public Registry Office.
Once the company is incorporated three directors will be needed at all times and at least one shareholder will be required. Shares can be with or without par value and can be registered or bearer shares. There is no minimum capital or paid up capital requirement.
The names of the directors must be in the Articles as filed; changes to directors must also be filed. Each corporation must have a resident Panamian agent named in the Articles; there are no other filing requirements unless the Articles are changed or the corporation is merged or dissolved. All items persons mentioned in the articles will automatically become public information as the articles can be consulted freely at any time by any person. For confidentiality reasons a nominee can be used to act as director and/ or shareholder.

Panama Foreign Corporation

A foreign company can be registered in Panama by depositing the following documents at the Public Registry Office:

• A notarized Spanish translation of the Articles of Association;
• A Board minute authorizing the Panamian registration;
• Copies of the most recent financial statements;
• A certificate from a Panamian Consul confirming that the company is organized according to the laws of its place of incorporation;
• Notification of the allocation of capital to the Panamian operation.

A foreign company can transfer its management address to Panama, and will therefore be subject to Panamian laws regarding public policy.

Panama Limited Partnership

Limited partnerships also called “sociedad de responsibilidad limitada” are governed by the Commercial Code and Law No 24 of 1966. This type of partnership can have between two and twenty partners. There is no restriction on the nationality of the partners or their nationalities. The share capital must be between $2,000 and $500,000. Names of all people involved in the company, more particularly names of shareholders will be known to the public registry. Each partner can be held liable for the amount subscribed that remains unpaid.
In case the partnership contains more than 5 partners an annual meeting must be held. There is no requirement for annual returns or the filing of accounts.
Similar to the above mentioned Limited Partnership an Individual Limited Proprietorship can be set up. In this case the liability of the owner will be limited to the amount of assets allotted.

Panama Foundation

Unlike a common trust, a panama foundation is a separate legal entity with no members or shareholders. It is often used for the protection of assets and does not allow any business activities.
The minimum capital requirement for a foundation is US$10,000. No accounts are necessary and an audit is not required. As with all Panamanian entities, tax is only levied on income generated within Panama.

Panama Trusts

Panamanian trust law was updated with Law No 1 of 1984. The settlor, trustees and beneficiaries need not be Panamanian nationals or resident in Panama. A Panamanian lawyer must act as an agent for the trust. Trusts may be created for existing or future property; additional property may be included after the settlement either by the settlor or a third party.
There are no registration, minimum capital requirements, or fees, and trust documents can be in English or Spanish. If a trust earns a taxable income in Panama it will be levied directly on the trust and not on the trustee.

Offshore Industry

Company

Of all of the above mentioned corporate structures only two are similar to the limited liability companies found in most countries, these are the “Sociedad de Responsabilidad Limitada” and the “Sociedad Anónima”. In both cases, the shareholders are only responsible for their participation on the company's authorized capital.

The S.A. has many features, of which the most important are:

• No restrictions on nationality or citizenship
• No residence requirements for Directors/Officers
• No paid-up capital requirements
• Total tax exemption on all and any business activity, transaction or income generated outside panama
• Various types of shares are possible
• No exchange controls or restrictions on the free movement of currency
• No requirements to file annual Financial Statements
• Keeping of books or records is not required.
• No requirement to hold annual General Meetings of Shareholders or Directors
• High Anonymity

A panama corporation can hold bank accounts, own real estate, boats, cars, etc. All or most of the aforementioned business activities or transactions can be obtained or set up without traveling to Panama.