PANAMANIAN PRIVATE FOUNDATIONS

INTRODUCTION

A Private Foundation is a legal entity with its own existence and identity, which is used for family, religious, public or charitable purposes and can not undertake commercial activities as a regular objective as they shall not be profit oriented. It may nevertheless engage execute commercial transactions and businesses necessary to carry on its objectives. Also, a Foundation can exercise shareholders' rights as owner of the shares of stock of a corporation that may be part of its assets.  These foundations are of similar nature to the Stiftung from Liechtenstein.

FORMATION

 The formation of a Private Interest Foundation is as simple and expedite as for the organization of a Panamanian offshore company. It can be created by one or more individuals or corporations, either directly or through a third party, usually, the Resident Agent of the Foundation, by means of the adoption of a deed which must be notarized and registered with the Public Registry. Once the deed is registered, the Foundation comes to life and is immediately able to comply with its objectives and may acquire and possess assets of any kind, contract obligations and be part in any administrative and judiciary process.

 For the formation of a Foundation; the modification of its foundation deed; the appointment of the beneficiaries or the members of the Board of Trustees there is no need for government approval.  Also, the management and operation of the Foundation is not subject to the supervision of any authority.  A Foundation will last either for the period stated in the statutes or when its purpose has been achieved.

 AFTER THE DEATH OF THE FOUNDER

 A Foundation can be created to become effective upon the death of the Founder, in which case the Founder does not have to comply with the requirements and formalities for the granting of a will.  Also, the founder's heirs will not have the right to revoke the creation of nor object the assignment of properties to the Foundation.  The law expressly states that the existence of legal provisions in the country of domicile of either the founder or the beneficiaries of the Foundation related to inheritance matters will not affect the validity of the Foundation; the assignment of estates to the Foundation nor the compliance or carrying on of its objectives.

 Alternatively, if the shares of the Foundation are in bearer form, then the shares can simply be passed on to the heirs, who immediately become the owners without the need to register the change with anyone.

Also, if nominee directors and / or officers are used, it is customary for them to pre sign an undated letter of resignation, which becomes effective the moment it is dated, and the owners can appoint new officers and directors, although this change will have to be registered.

Another option would be for the new owners to instruct us to appoint a new person with the power of attorney to operate the Foundation, replacing the person who previously had it.

In other words, this entity can function in a very flexible and user friendly way, and will not have to go through any probate process if it is set up correctly in the beginning.

IRREVOCABILITY

The Foundations will be irrevocable under any of the following circumstances.  If the foundation deed have not been registered with the Public Registry.  The foundation deed indicates otherwise.  For any reason set forth in the Panamanian legislation to revoke a donation.  Foundations created to take effect after the death of the Founder can be revoked by him at any time.  Transfer of assets to the Foundation either by the founder or by a third party shall be irrevocable unless otherwise stated in the act or document of assignment.

ESTATE OF A FOUNDATION

The assets of a Foundation may be obtained as a result of any lawful act or transaction and may consist of properties of any nature, present or future, either real estate, securities, shares of stock, chattel of any nature and money, among others. The assets of a Foundation can be increased at any time.  Once a Foundation has been formed, the founder must comply with his duty to transfer and deliver to the Foundation assets for a value equal to but not less than US $10,000.00.  The assets of the Foundation are a separate and independent estate from the founder's personal assets. Once the assets have been transferred to the Foundation, their property no longer belongs to the founder, therefore said estate can not be attached, seized or be subject to any lawsuit or legal actions as a result of obligations or liabilities of the founder or the beneficiaries of the Foundation.

The creditors of a founder have the right to object or contest the creation of a Foundation or the transfer of assets should that represent a fraudulent action against their credits. The rights of the creditors will elapse in a period of three (3) years as of the registration of the foundation deed of the Foundation in the Public Registry.

FOUNDATION COUNCIL

 All Foundations must have a Foundation Council or Board of Trustees, which shall have the duty to fulfill the objectives and purposes set forth in the deed of formation. The members of the Council are appointed and replaced by the founder or his attorney-in-fact.  The duties and liabilities of the members of the Council must be set forth in the foundation deed. If the Council is composed by corporations, the minimum of members will be one (1). In case of individuals, the Council must be composed of a minimum of three (3) people, whose names and domicile must be set forth in the foundation deed. 

 The members of the Council must keep informed the beneficiaries of the Foundation about its financial situation and its estate at least once a year. No reports must be filed before Panamanian authorities.  Also, in compliance with the objectives of the Foundation, the Council must deliver to the beneficiaries of the Foundation the assets or moneys they are entitled to as set forth in the foundation deed of the Foundation.

DISSOLUTION

A Foundation can be dissolved any time as a result of any of the following causes. When the objectives of the Foundation as set forth in the foundation deed have been met.  For non compliance of the objectives of the Foundation or because they are difficult to comply with.  When the founder revokes the Foundation.  When the Foundation is in bankruptcy.  When the duration of the Foundation as set forth in the foundation deed expires.  When the assets of the Foundation are lost or extinguished.  Any additional reason set forth in the foundation deed.

TAX BENEFITS

 The law states that the organization of a Foundation; the amendment of its articles or its dissolution will not be subject to any type of tax, nor will the assignment, transfer or security of the assets of the Foundation.  Likewise, the income produced by the assets of a Foundation will not be subject to taxes, contributions, rates or lien of any kind provided that the assets are located outside of Panama, consist of savings accounts and time deposits or shares of stock or securities of any kind issued by companies whose income is not earned nor produce within Panama or when such income is not subject to taxation in this country even though the shares of stock or the securities owned by the Foundation are kept in Panama.

 Also, it will be exempted from all types of taxes the transfer or assignment of real estate, chattels, titles, securities, shares of stock, moneys or assets of any kind in favor of the founder's relatives within the first degree of consanguinity or to the founder's spouse in compliance in accordance with the objectives of the Foundation or as a result of the dissolution and liquidation thereof.  All Foundations must pay a Government Fee upon its constitution and thereon on a yearly basis on the date of formation.

REDOMICILIATION OF FOUNDATIONS

 Foreign Foundations can be domiciled in Panama and adopt Law 4 as a governing legal provision by recording its foundation deed together with a good standing certificate (certificate of existence) issued by the corresponding authority of the country of organization and an affidavit issued by its Foundation Council stating the interest of the Foundation to continue existing now as a Panamanian Foundation.

ADVANTAGES

 This new instrument provided by our legislation is a complement to the well known Panamanian offshore companies to family and estate planning because of its simplicity, privacy, flexibility and trustworthiness. Also, they are not subject to much formalities or requirements and its cost is very competitive with respect to those of other foreign jurisdictions.

Pricing

Please note that these are standard options only, so price will vary due to individual circumstances, shipping methods, etc.  Use the inquiry form below for standard information requests, or, if you want to ask more specific questions, use our Feedback Form or our Contact Form on the first page of this website.

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