THE
PANAMA PRIVATE FOUNDATION LAW
Law
Number 25 of June 12, 1995
(Foundation of Private Interest)
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 purpose, 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 profit oriented. They may nevertheless engage in
commercial activities in a non-habitual manner or exercise the rights deriving
from titles representing the capital of business companies held as part of a
foundation's assets, provided that the economic results or proceeds from such
activities are used exclusively towards the foundation's objectives.
Article
4.
Private
foundations may be constituted to become effective at the time of constitution
or after the death of its founder, by any of the following methods:
1. By private document, executed by the founder, whose signature must be
authenticated by a notary public at the place of constitution.
2. 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 required for the execution of wills 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, 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 capital of the foundation, expressed in any currency of legal
tender that in no case shall be less than an amount equivalent to ten thousand
Balboas (B/10,000.00). [=US$10,000.00]
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 of appointing the beneficiaries of the foundation, 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 Spanish, they
must be protocolized together with their [Spanish] translation by a certified
public translator of the Republic of Panama.
Article
7.
Any amendment to
the foundation charter, when permitted, shall be executed and signed in
accordance with what is established therein. The relevant agreement, resolution
or act of amendment shall contain the date on which it was carried out, and a
clear indication of the name of the person or persons executing such
amendments, whose signatures 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 of non-payment and all other complementary provisions of the
aforementioned legal principles, shall also 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. Registration at the Public Registry shall in
addition constitute a means of publicity before third parties. Consequently,
the foundation may acquire and own assets of all kinds, 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 any third party
that has 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 after the demise of its 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 actions taken
fulfilling the purposes or objectives of the foundation, or on behalf of the
legitimate rights of its beneficiaries. In no case shall such assets respond
for personal obligations of the founder or of the beneficiaries.
Article
12.
Foundations shall be irrevocable, except in
the following cases:
1. When the foundation charter has not been registered at the Public Registry;
2. When the opposite is expressly established in the foundation charter.
3. 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 of such
assets.
Article
13.
In addition to
the provisions of the previous article, when a 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 to the foundation, 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 affect the foundation or its validity, or prevent
the fulfillment 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 contest the
contributions or transfer of assets to 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 powers 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 shall not be
less than three (3).
Article
18.
The Foundation Council shall be responsible
for 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. To carry out acts, contracts or lawful businesses that may be suitable or
necessary to fulfill the purposes 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 economic 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 loss or deterioration of the assets of the foundation,
nor for any damages or prejudice caused by their decisions, provided that the
above mentioned 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 contains no provision in this regard, the rendering of accounts
must be done annually. If the accounts so rendered are not objected within the
term established in the foundation charter or its regulations, or, if the
charter does not regulate the matter, 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 contains no provision regarding 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 they do not administer the assets of the foundation with 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 arise.
5. For insolvency or bankruptcy proceedings.
Article
23.
The judicial
removal of the members of the Foundation Council may be requested by the
founder and the beneficiary or beneficiaries. Should the beneficiaries be
disabled or minors, they may be represented by whoever exercise upon them the
patria potestas or guardianship, as the case may be. The judgment 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, which may be
constituted by natural or juridical persons, such as auditors, protectors of
the foundation or others similar entities. 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 fulfillment of the foundation's purposes 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 fulfill.
4. To appoint new members of the Foundation Council due to temporary or
permanent absence, or for expiration of the period of any of them.
5. To appoint new members of the Foundation Council by reason of temporary or
accidental absence of any 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 oversee 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 fulfillment of the purposes for which it was constituted or if their fulfillment
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. Any
beneficiary of the foundation may contest any acts of the foundation that may
damage his or her rights, by denouncing such circumstance to the protector or
to other supervisory bodies, if any; or if there are none, by 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 arising therefrom,
or any other act in connection therewith, shall be exempt from all taxes,
contributions, duties, liens or assessments of any kind, provided that such
assets are:
1. Assets located abroad.
2. Money deposited by natural or juridical persons whose income does not derive
from a Panamanian source or is not 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 fulfillment 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. The 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 procedures 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 article, shall be duly
protocolized and registered at the Public Registry in order for the foundation
to 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, as well as
the proceedings already initiated against it or those that the foundation may
have promoted, shall continue in force, and such rights and obligations shall
not be affected due to the change of jurisdiction 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 made at the Public Registry in a
special section to 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. Breaches of this duty shall be
sanctioned with a six months imprisonment and a B/.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 connection with the
foundation shall be resolved by arbiters or arbitrators, as well as establish
the procedure they should abide by. In the event no such procedure has been
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.
If you wish to download the
Private
Foundation Law in PDF format, please click.