Panama law 25 of 12 June 1995 - Panama Private Interest Foundation
Article 1. Establishment; Endowment.
A foundation of private interest may be established by one or more natural or juridical persons, acting in their own names or though another person in accordance with this act. An endowment shall be made at the time of such establishment, to be utilized exclusively for the objects of the foundation set forth in its memorandum of foundation. The initial endowment may be increased by the person who established the foundation, who shall be called the founder, or by any other person.
Article 2. Governance; Applicable Law.
A foundation of private interest shall be governed by its memorandum of foundation and its regulations, as well as by the provisions of this act and by any other applicable laws and regulations. The provisions of Title II of Book I of the Civil Code shall not be applicable to foundations of private interest.
Article 3. Prohibition of Profit-Oriented Activities.
Foundations of private interest shall not be established for the purpose of engaging in profit-making activities. Notwithstanding the previous sentence, they may from time to time engage in commercial activities or exercise rights of ownership of business enterprises forming a portion of the endowment of the foundation, provided that the result or economic proceeds of such activities are applied exclusively to the purposes of the foundation.
Article 4. Effective Date of Establishment.
Foundations of private interest may come into existence immediately upon their establishment or after the death of their founders, by either of the following methods:
· By means of private document signed by the founder, with the signature of the founder being authenticated before a notary public in the jurisdiction in which the foundation is established.
· Directly before a notary public in the jurisdiction in which the foundation is established.
· Whichever the method of establishment, the requirements for the establishment of foundations set forth in this act shall be complied with.
· If a foundation is established, either by public or private document, such that it will come into existence after the death of the founder, the requirements for the execution of testamentary instruments will not be applicable.
Article 5. The Memorandum of Foundation.
The memorandum of foundation shall contain:
· The name of the foundation, expressed in any language with characters of the Latin alphabet and to avoid confusion, shall not be the same as or similar to the name of a foundation existing in the Republic of Panama. The name shall include the word "foundation" to distinguish it from other natural or juridical persons of other kinds.
· The initial endowment of the foundation, expressed in any legal currency, in an amount at least the equivalent of ten thousand Balboas (B/.10,000.00).
· The names, in complete and clear form, including the addresses, of the member or the members of the foundation council, of which the founder may be a member.
· The domicile of the foundation.
· The name and domicile of the resident agent of the foundation in the Republic of Panama, who shall be a lawyer or a firm of lawyers, and who shall will countersign the memorandum of foundation prior to its filing in the Public Registry.
· The objects of the foundation.
· The manner of designating the beneficiaries of the foundation, among whom may be included the founder.
· The reservation of the right to modify the memorandum of foundation when it is considered convenient.
· The term of existence of the foundation.
· The distribution to be made of the property of the foundation and the method of the liquidation of its endowment in the event of the dissolution of the foundation.
· Any other lawful provision deemed desirable by the founder.
Article 6. Language; Execution; Filing.
A memorandum of foundation and any amendment that is made to it shall be written in any language with characters of the Latin alphabet, shall comply with the requirements for the filing of instruments and deeds in the Public Registry, and shall have been notarized before a notary in the Republic of Panama. If a memorandum of foundation or an amendment thereto is not in the Spanish language, it will be notarized, together with its translation by a public interpreter licensed by the Republic of Panama.
Article 7. Amendment of Memorandum of Foundation.
Amendments to the memorandum of foundation, when they are permitted, must be effected and signed in accordance with established procedures. The agreement, resolution or act of modification shall contain the date on which it was consummated, the clearly identifiable name of the person or persons who signed it, and their signatures, which shall authenticated by a notary public in the place where the instrument was signed.
Article 8. Annual Fees and Taxes.
All foundation of private interest shall pay registration fees and an annual tax at a rate equivalent to that provided for corporations in Articles 318 and 318A of the Fiscal Code.
The procedure and the method for payment, the surcharge for late payment, the consequences of failure to make payment and other provisions supplementing the legal provisions cited above shall be applicable to foundations of private interest.
Article 9. Effect of Filing Memorandum of Foundation.
The filing of the memorandum of foundation in the Public Registry shall give the foundation juridical personality without any further legal or administrative authorization. Furthermore, such filing constitutes public notice to third parties. Upon such filing, a foundation may acquire and possess property of all kinds, incur obligations and be a party to administrative and judicial proceedings of every nature, in accordance with its applicable established procedures.
Article 10. Endowment.
At the time when a foundation has acquired juridical personality, the founder or third parties who have obligated themselves to contribute property to the foundation, at their own instance or upon demand by any person with an interest in foundation, shall formalize the transfer to the foundation of the property for which they are obligated. When a foundation has been established effective upon the death of the founder, it shall be deemed to have existed prior to his death, with respect to the donations that he has made to the foundation.
Article 11. Foundation?s Assets Separate.
For all legal purposes, the property of a foundation shall constitute an estate separate from the personal assets of its founder. Accordingly, the property of a foundation shall not be seized, attached nor made the object of a precautionary action or measure, except for obligations incurred or for damages caused in furtherance of the purposes or objectives of the foundation or for legitimate rights of its beneficiaries. In no case, shall such property be used to satisfy the personal liabilities of the founder or of the beneficiaries.
Article 12. Irrevocability of Foundations and Contributions; Exceptions.
Foundations shall be irrevocable, except in the following cases:
· When the memorandum of foundation has not been filed in the Public Registry.
· When the memorandum of foundation expressly provides to the contrary.
· For any of the causes for the rescission of its donations.
· Transfers made to foundations shall be irrevocable by the person who has made the transfer, unless express provision to the contrary is made in the instrument effecting such transfer.
Article 13. Revocability of Foundation.
In addition to the provisions contained in the previous article, when a foundation has been established effective after death of the founder, he shall have the exclusive and unlimited right to revoke it. The heirs of the founder have no right to revoke a foundation or transfers to it, even when the memorandum of foundation has not been filed in the Public Registry prior to the death of the founder.
Article 14. Effect of Extraterritorial Laws.
The existence of legal provisions respecting testamentary matters in the domicile of the founder or of the beneficiaries shall not be assessable against the foundation, affect its validity or impede the fulfillment of its objectives set forth in its memorandum of foundation or its regulations.
Article 15. Rights of Creditors; Limitation of Actions by Creditors.
The creditors of the founder or a third party shall have the right to contest the contributions or transfers of goods to a foundation, when the transfer constitutes an act of fraud upon the creditors. The rights and acts of such creditors will expire after the three (3) years counting from the contribution or transfer of the goods to the foundation.
Article 16. Sources of Endowment.
The endowment of the foundation may arise from any lawful business and may consist of property of any nature, whether presently or thereafter existing. Also, the founder or a third party may periodically add money or other property to the endowment. Property may be transferred to the endowment of the foundation by virtue of a public or private document. However, if real property is transferred, the transfer shall comply with the requirements for the conveyance of real property.
Article 17. Foundation Council; Powers; Number of Members.
A foundation shall have a foundation council, the powers or responsibilities of which shall be established in the memorandum of foundation of the foundation or in its regulations. Unless a member of the foundation council is a body corporate, the number of members of the foundation council shall not be less than three (3).
Article 18. Responsibilities of Foundation Council.
The foundation council is responsible for the achievement of the purposes or objectives of a foundation. Unless otherwise provided in the memorandum of foundation or in the regulations of a foundation, the foundation council shall have the following general obligations and duties:
· To administer the property of a foundation in accordance with the memorandum of foundation and its regulations.
· To perform acts, enter into contracts or engage in lawful business that is appropriate or necessary to achieve the objects of the foundation, including contracts, agreements and other instruments or obligations, clauses and conditions that are necessary and convenient to achieve the objects of the foundation and that are not contrary to law, morality, good practice or public order.
· To inform the beneficiaries of the foundation of the condition of its endowment in accordance with procedures established in its memorandum of foundation or its regulations.
· To deliver to the beneficiaries of the foundation the property or resources to which they are entitled, as established in its memorandum of foundation or its regulations.
· To perform the acts or contracts that this Act and other applicable legal provisions or regulations permit to the foundation.
Article 19. Organs of Supervision.
A memorandum of foundation or regulations may provide that the members of the foundation council may exercise their powers only with the prior authorization of a protector, committee or any other organ of supervision designated by the founder or by a majority of the founders. The members of the foundation council shall not be liable for loss to or diminution of the property of the foundation or for damages or injury when such authorization has been properly obtained.
Article 20. Obligations of Foundation Council to Beneficiaries.
Unless the memorandum of foundation or regulations provides to the contrary, the foundation council shall render an accounting of its administration to the beneficiaries and to any organ of inspection. If the memorandum of foundation of a foundation or its regulations do not otherwise provide, the rendering of such accounting shall be made annually. The accounting shall be deemed to have been approved, if no objection is made to such accounting within the period set forth in the memorandum of foundation or regulations, or in the absence of such provision, within ninety (90) days counting from the day on which the accounting was rendered, of which period notice is to be given in the rendering of the accounting. After such period or approval of the accounting, the members of the foundation council shall be discharged from responsibility for their administration, unless the foundation council has not acted with the diligence taken by a very prudent man in managing his own affairs. Such approval shall not discharge members of the foundation council from liability to beneficiaries or third parties that have interest in the foundation for damages caused by gross misconduct or fraud in their administration of the foundation.
Article 21. Reservation of Right to Remove and Add Members of the Foundation Council.
In the memorandum of foundation, the founder may reserve to himself, or to other persons, the right to remove members of the foundation council or to designate or add new members.
Article 22. Removal of Members of Foundation Council by Judicial Action and Under Provisions of the Memorandum of Foundation.
When the memorandum of foundation or the regulations make no provision as to right to remove and the causes for removal of the members of the foundation council, they may be removed by means of a summary judicial proceeding for the following causes:
· If their interests conflict with the interests of the beneficiaries or of the founder.
· If they administered the property of the foundation without the diligence taken by a very prudent man in managing his own affairs.
· If they are convicted of a crime against property or the public trust. In this case, they may be suspended during their trials.
· For inability or impossibility to carry out the objectives of the foundation, from the time such cause occurs.
· For insolvency, bankruptcy, or competition.
Article 23. Proper Parties to Petition for Removal of Members of the Foundation Council.
The founder and the beneficiary or the beneficiaries of a foundation may petition for judicial removal of members of the foundation council. If the beneficiaries lack legal capacity or are minors, they may be represented by persons who exercise parental rights or by guardians. The judgment of the tribunal that decrees the removal of members of the foundation council shall designate new members to replace those who have been removed, which new members shall be persons possessing the requisite capacity, competence and moral character to administer the property of the foundation in accordance with the objects prescribed by the founder.
Article 24. Powers of Organs of Supervision.
The memorandum of foundation or regulations may provide for organs of supervision, which may comprise natural or juridical persons, such as auditors, protectors of the foundation or other similar persons.
The powers of the organs of supervision shall be set forth in the memorandum of foundation of a foundation or in its regulations and may include, among others, the following powers:
· To oversee the fulfillment of the objects of the foundation by the foundation council and protect the rights and interests of the beneficiaries.
· To require the rendering of accountings by the foundation council.
· To modify the purposes and objects of a foundation if they are impossible or of very difficult to achieve.
· To appoint new members of the foundation council caused by reason of temporary absence or the conclusion or termination of their terms of office.
· To appoint new members of the foundation council caused by reason of their temporary or accidental absence.
· To increase the number of the members of the foundation council.
· To approve resolutions adopted by the foundation council in accordance with in the memorandum of a foundation or its regulations.
· To protect the property of the foundation and to assure that it is utilized for the uses or purposes set forth in its memorandum of foundation.
· To remove beneficiaries of the foundation and to add others in accordance with its memorandum of foundation or its regulations.
Article 25. Dissolution.
The foundation shall be dissolved by reason of:
· The arrival of the date specified in the memorandum of foundation for its termination.
· The fulfillment of the purposes for which it was established or the impossibility of such fulfillment.
· Insolvency, cessation of payments or judicial declaration of bankruptcy at the instance of creditors.
· The complete loss or exhaustion of the property of the foundation.
· Its revocation.
· Any other cause set forth in the memorandum of foundation or in this Act.
Article 26. Rights of Beneficiaries to Complain about Actions.
Any of the beneficiaries of a foundation may complain about actions of the foundation that damage his rights, by complaint to the protector or other organs of supervision if they exist; or if they do not exist, by an action before a court of competent jurisdiction in the domicile of the foundation.
Article 27. Exemption of Foundation from Certain Taxes.
There shall be exempt from all imposts, contributions, taxes, encumbrances or payments of any class or kind, the establishment, modification or dissolution of a foundation, as well as the transfer, transmission or encumbrance of the property of the foundation and the income derived therefrom or any other action with reference thereto, whenever such property constitutes:
· Property located outside of Panama.
· Money deposited by natural or juridical persons whose income is not derived from a Panamanian source or not taxable in Panama for any reason.
· Shares or bonds of any kind issued by corporations whose income is not derived from a Panamanian source or whose income is not taxable for any reason, even when such shares or bonds are deposited in the Republic of Panama.
They shall also be exempt from all taxation the transfer of real property, titles, certificates of deposit, bonds, money or stock made to fulfill the purposes or objects of a foundation, or upon its dissolution, to relatives of the founder within the first degree of consanguinity and to the spouse of the founder.
Article 28. Changing Domicile of the Foundation
Foundations established in accordance with foreign laws may subject themselves to the provisions of this law.
Article 29. Method of Changing Domicile
Foundations referred to in the previous article that elect to subject themselves to the provisions of this act, shall present a certificate of continuation, approved by their appropriate organs in accordance with their internal governance, which shall contain:
· The name of the foundation and the date of its establishment.
· Information respecting its registration or filing in its country of origin.
· An express declaration of its desire of to continue its legal existence as a Panamanian foundation.
· The information required for the establishment of foundations of private interest specified in the Article 5 of this act.
Article 30. Further Requirements for Changing Domicile.
The following documents shall be appended to certificate containing the resolution of continuation and the other information set forth in the previous article:
· A copy of the original charter of the foundation that desires to continue in Panama, together with any modification.
· A power of attorney in favor of a Panamanian lawyer authorizing him to perform the acts necessary to effect the continuation of the foundation in Panama.
· The certificate of continuation, as well as the other documents specified in this act, shall be duly notarized and filed in the Public Registry, in order for the foundation to continue its legal existence as a foundation of private interest of the Republic of Panama.
Article 31. Liabilities of Changing Domicile Unaffected.
In the cases specified in Article 26, the responsibilities, duties and rights of the foundation existing prior to its change of domicile or of legislation, will continue to be in effect, as well as legal proceedings that have been commenced against or by the foundation, such rights and obligations by the change authorized by the specified legal provisions.
Article 32. Changing of Domicile of Panamanian Foundation in Another Jurisdiction.
Foundations established in conformity with this act, as well as the property forming their endowment, may move or subject themselves to laws and jurisdiction of another country, in accordance with their memorandums of foundation or their regulations.
Article 33. Place for Filings.
Instruments relating to foundations of private interest will be filed in the Public Registry, in a special section to be denominated "Section of Foundations of Private Interest." The Executive Branch, acting through the Ministry of Government and Justice, will send applicable regulations to this section.
Article 34. Foundations Subject to Money Laundering Laws.
To avoid improper use of foundations of private interest, there will be applied to their activities, all of the provisions of Executive Order No. 468 of 1994 and any other measures for the purpose of combating the laundry of money from drug trafficking.
Article 35. Confidentiality.
The members of the foundation Council and of the organs of supervision, if they exist, as well as the public or private employees who have knowledge of the activities, transactions or operations of foundations, shall at all times maintain restraint and confidentiality with respect thereto. Violations of this obligation will be punished by imprisonment for 6 months and fines of fifty thousand Balboas (B/.50,000.00), without prejudice to civil liability.
The provisions of this article are applicable without prejudice to information required to be revealed to government officials and inspections that they make in accordance with law.
Article 36. Resolution of Certain Controversies.
All controversies for which no procedure is specified in this act shall be resolved by summary proceedings.
The memorandum of foundation or regulations may provide that any controversy that arises concerning the foundation will be resolved by an arbitrator or arbitrators, as well as the procedures for such arbitration. In the event that no such procedures are so provided, the rules contained the Judicial Code shall apply.
Article 37. Effective Date.
This act will have effect commencing with its promulgation.