Docstoc

Private Foundations: A World Survey Panama

Document Sample
Private Foundations: A World Survey Panama Powered By Docstoc
					                                                                                           1


                    PRIVATE FOUNDATIONS: A WORLD SURVEY
                                 PANAMA




                                  ALVARO AGUILAR-ALFU


                              1. Introduction: The Jurisdiction


Briefly describe the basic features, the legal system and the constitution of your
jurisdiction. This section is limited to 300 words.

The Republic of Panama is located in the Western Hemisphere and forms a link between
Central and South America. The Republic has an area of 77,082 square km. The country’s
population of 3.5 million speaks Spanish as the official language. However, English is widely
spoken and understood in the urban centers. Various native languages exist such as Kuna
and Ngobe-Bugle. Minority urban groups speak Italian, Hebrew, Greek, Cantonese Chinese
and Hindi, among others, giving the capital of Panama City a heterogeneous character.

[The economy is fully dollarized, The local Balboa and the U.S. Dollar, are both currencies of
legal tender in Panama at the same 1:1 exchange rate. The Constitution forbids the
enactment of laws providing for a currency of compulsory tender, which has preserved the
freedom from currency restrictions.

The Republic of Panama is a sovereign and independent State. Its government is centralized,
republican, democratic and representative (too many adjectives), having a a President, a
Vice President and twelve Ministers of State who comprise the Executive Power; the
Legislative Assembly with 72 Legislators forming the Legislative Power, and 9 Magistrates
that head the Judicial Power. These three powers are the ones that govern the country.

The Civil Law systemprevails in Panama, under which, judges are not bound by judicial
precedent in their decisions. Judges rely on the Constitution, followed by Codes, laws and
regulations as a direct source of law. Only 3 identical decisions by the full Supreme Court
have a rank of mere “probable doctrine” which the Judicial Code does not define. What is
understood by probable doctrine ? In the absence of express legal provisions applicable to a
subject matter, general principles of law as stated in scholarly publications (and in commerce
law, local customs if practiced by 5 or more merchants who testify to that fact) serve as an
indirect source of law.

Local and international arbitration decisions are almost always upheld by local courts. The
main arbitration centers are run by the Panama Chamber of Commerce and Industries and
the Panamanian Chamber of Construction. Ad-hoc panels also hear cases when parties
have signed an arbitration panel for said purpose.




08.08.2011
                                                                                                                                         2




        2. Brief overview of all the various types of foundations in your jurisdiction and their
                                             main purposes


a.         What are the types of foundations (private and charitable foundations, family and
           mixed foundations etc.) in your jurisdiction, and what are their main uses?

           Local legislation includes regulations related to associations and public-interest
           foundations under the Civil Code and private foundations under the Law 25 of 1995.
           Civil Code associations and public-interest foundations are used primarily for
           charitable endeavours which raise funds from the public and expect to have donors
           deduct their donations for Panama income tax purposes. Private foundations are
           used for family asset protection and privately-funded charitable endeavours.

b.         Is the function of a private foundation performed by another entity in your
           jurisdiction, e.g. a company limited by guarantee?

           No.

c.         Does your jurisdiction offer alternatives to private foundations, such as trusts or
           partnerships etc.?

           Panama offers trusts under Law 1 of 1984, unlimited liability partnerships under the
           Code of Commerce and Civil Code, unincorporated joint ventures, corporations and
           limited liability companies.

                                                        3. Foundation law


a.         What is the legal basis that provides for private foundations?

           Law 25 of 19951 whereby Private Interest Foundations are regulated and Executive
           Decree 417 of 1995 whereby the Section of Private Foundations is created in the
           General Direction of the Public Registry and the registration of the formation,
           amendment and extinction of said Foundations are regulated. 2

           The Private Foundation Law provides that all legal provisions for the purpose of
           combatting the money laundering from drug trafficking will be applicable to the
           activities of private interest foundations of to their avoid improper use. 3

            Could you please provide a citation for the Law and for the most important decrees ?


1
     Ley No. 25, 12 Jun. 1995, Por la cual se regulan las Fundaciones de Interés Privado [Whereby Private Interest Foundations are
     regulated]. Gaceta Oficial [G.O.], 14 Jun. 1995 (Pan.). (hereinafter the “Private Foundation Law”)
2
     Decreto Ejecutivo No.417 de 1995 Por el cual se crea en la Dirección General de Registro Público la Sección de Fundaciones de Interés
     Privado y reglamenta la inscripción de la constitución, modificación y extinción de dichas fundaciones [Whereby the Section of Private
     Foundations is created in the General Directorate of the Public Registry and the registration of the formation, amendment and extinction
     of such Foundations are regulated.]. Gaceta Oficial [G.O.],1 de agosto de 1995 (Pan.). (hereinafter “Executive Decree 417”)

08.08.2011
                                                                                                                                      3


b.         What new legislation/regulations concerning private foundations, or of interest to
           private foundations, have appeared recently, e.g. in the last twelve months?

           Law 2 of 2011 imposes additional penalties on resident or registered agents who do
           not comply with know-your-customer regulations. 4

c.         What new legislation/regulations (if any) are expected or are under discussion for
           the future?

           None.

d.         What key case decisions concerning private foundations have recently appeared or
           are pending in your jurisdiction?

            In the most recent published case concerning private foundations the Supreme Court
           denied a request made by an Argentine court through a Rogatory Letter that a
           Panama resident agent provide information on payments made by a private
           foundation to an Argentine citizen. The Argentine court made the request to the
           Panama judiciary for use of the information in a lawsuit by a plaintiff against the
           alleged beneficiary of the foundation payments. The Supreme Court issued the
           denial because the Code of Commerce prohibits the use of accounting records as
           evidence against merchants without following local procedures for an accion
           exhibitoria5 and posting the respective bond as ordered by the judge authorizing said
           measure. In addition, the Supreme Court reminded that information on accounts of
           the beneficiary is subject to banking confidentiality and its release would contravene
           ordre public.6 Please provide a citation for this case and also briefly expand on the
           facts and the ruling.

                                       4. Private foundations: key information


a.         How long does it take to form up a private foundation?

           The law provides that private foundations may be formed to become effective at the
           time of constitution or after the death of its founder, by any 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 formation.

           b) Directly before a notary public at the place of formation.


3
     Private Foundation Law, article 34.
4
     Ley 2 de 2011 Que regula las medidas para conocer al cliente para los agentes residentes de entidades jurídicas existentes de acuerdo
     con las leyes de la República de Panamá [Whereby the know your customer measures by registered agents of existing corporations
     organized according to the laws of the Republic of Panama are governed.]. Gaceta Oficial [G.O.] 26713-C. 1 de febrero de 2011 (Pan.).
     (hereinafter “Law 2 of 2011”) .
5
     Accion exhibitoria is the court procedure for a controlled discovery of documentary evidence.
6
     Decision August 30, 2010, Supreme Court of Justice of Panama, General Affairs Section, in re Rogatory Letter by First Instance
     National Court No. 19, Federal Capital of Argentine Republic on proceedings by Chouela, G.J. against Cuñarro de Recanati, S.

08.08.2011
                                                                                              4


           Whichever method of formation is used, it must comply with the formalities provided
           for the Private Foundation Law for the creation of foundations.

           In case of a mortis causa foundation being created either by public or private
           document, to have effect after the death of the founder, the formalities provided in
           the Civil Code for the execution of wills shall not be applicable. 7

           In practice, Promoters of a foundation must provide KYC documents to the resident
           agent who is required by law to conduct a background search. Drafting of public
           deed before a Panama Notary8 and its registration by the Public Registry may take 2
           business days or less. The foundation charter is binding on its parties (founders and
           directors) from the date of execution of the public deed. The foundation is deemed
           as valid before third parties from the time of its registration.

b.         Does the private foundation have legal personality?

           Yes. The filing of the foundation charter in the Public Registry shall give the
           foundation juridical personality without any further legal or administrative
           authorization. Furthermore, such filing constitutes public notice of its existence 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. 9

           The heirs of the founder have no right to revoke a foundation or transfers to it, even
           when the foundation charter has not been filed in the Public Registry prior to the
           death of the founder. 10

c.         What are the costs of and fees for forming a private foundation?

           The registration of the documents whereby a Private Foundation are subject to the
           payment of these registration taxes depending on the amount of its capital:

           a)         For the first US$10,000.00 of capital: US$50.00 of registration tax.

           b) From US$10,001.00 to US$100,000.00: US$50.00 for the first US$10,000.00 and
           US$0.75 for each additional US$1,000.00 or additional fraction, up to US$100,000.00.

           c) From US$100,001.00 to US$1,000,000.00: US$117.50 for the first US$100,000.00
           and US$0.50 for each US$1,000.00 or fraction on excess over US$100,000.00

           d) Over US$1,000,000.00: US$567.50 on the first million and US$0.10 for each
           US$1,000.00 or fraction on excess over one million.

7
     Private Foundation Law, article 4.
8
     Executive Decree 417, article 2.
9
     Private Foundation Law, article 9.
10
     Private Foundation Law, article 13.

08.08.2011
                                                                                                                                  5


           The documents whereby the capital of the Foundation is increased are subject to
           payment of registration taxes only for the amount actually increased.

           The documents whereby the Private Foundation charter is amended or terminated
           shall pay registration fees in the amount of US$40.00. 11

           Supreme Court Agreement 4 of 2000 sets minimum attorney fees of US$1,000 as
           guideline for formation of a foundation charter. 12

           In practice, standard costs (including US$50 registration tax and US$400 1st year
           annual tax) and prevailing market rates for attorney fees are around of US$950..

d.         What is the minimum capital required?

           The foundation charter must state that the foundation has a capital of US$10,000 or
           its equivalent in any currency. 13 An endowment shall be made at the time of such
           formation, to be used solely for the purposes of the foundation set forth in its
           foundation charter. The initial endowment may be increased by the person who
           established the foundation, who shall be called the founder, or by any other person.
           14



           Once a foundation acquires legal 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 perform the
           transfer to the foundation of the property for which they are obligated. 15

           The endowment of the foundation may arise from any lawful business and may
           consist of property of any nature, whether existing currently or in the future. Also,
           the founder or a third party may periodically add funds or other property to the
           endowment. Property may be transferred to the endowment of the foundation by a
           public or private document. However, if real property is transferred, the transfer
           shall comply with the requirements for the conveyance of real property. 16

e.         What, approximately, are the basic annual costs of maintaining a private
           foundation?

           Supreme Court Agreement 4 of 2000 sets minimum attorney fees of US$250 as
           guideline for serving as resident agent. 17

           In practice, basic costs (including US$400 annual tax) and prevailing attorney fees are
           a total of US$550.

11
     Executive Decree 417, article 11.
12
     Tarifa de Honorarios Profesionales Mínimo de los Abogados en la República de Panamá [Schedule of Minium Legal Fees for Attorneys
     in the Republic of Panaama]. G.O. 24,305 de 21 de mayo de 2001 (hereinafter Supreme Court of Justice Agreement 2 of 2000).
13
     Private Foundation Law, article 5.
14
     Private Foundation Law, article 1.
15
     Private Foundation Law, article 10.
16
     Private Foundation Law, article 16.
17
     Supreme Court of Justice Agreement 2 of 2000, whereby the minimum rates for legal practice are set.
     http://www.cnapanama.com/tarifa.htm.

08.08.2011
                                                                                                6




           f.         Are private foundations registered on formation?

           Registration of the foundation charter makes it valid towards third parties. 18
           Therefore, private foundation charters are deemed as binding on its parties
           (founders, council members and beneficiaries) upon its execution in a public deed
           before a Notary Public.

g.         If so, what is the extent of the information in relation to private foundations (if
           any), which is available to the professional service provider, the Registrar of
           Foundations (or equivalent) and which is available on the Public Registry?

           The full text of the charter containing the name of the founder and council members
           is available to the public at the Section of Private Foundations. The Section of Private
           Foundations was created as part of the Public Registry is responsible for the
           registration of the documents related to the formation, amendment and extinction
           of the Private Foundations and ensuring their compliance with the Private
           Foundation Law. 19

           The names of the beneficiaries in the by-laws are available to the professional service
           provider. The Private Foundation Law provides that members of the foundation
           council and of supervisory bodies, 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 to
           information not available through the Public Registry.

           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 anti-money laundering laws. 20

h.         What are the foundation documents: statutes and by-laws? Briefly describe their
           contents and any registration or other formalities.

           The following provisions are subject to transcription in a public deed by a Panama
           Notary Public and its registration:

           1. The name of the foundation, expressed in any language with characters of the
           Latin alphabet, cannot be equal or similar to that of a foundation previously existing
           in the Republic of Panama, so as to avoid confusion. The name must include the word
           “foundation” to distinguish it from other individuals or entities of a different nature.

           2. The initial maximum capital of the foundation, expressed in any currency of legal
           tender that in no case shall be less to a sum equivalent ten thousand U.S. Dollars .



18
     Private Foundation Law, article 9.
19
     Private Foundation Law, article 33. Executive Decree 417, article 1.
20
     Private Foundation Law, article 35.

08.08.2011
                                                                                              7


           3. Names 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.

           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. 21

           Any information not included in the abovementioned list - including the names of the
           beneficiaries and protectors - may be listed in private by-laws or regulations
           executed by the founder which only need notarization by a Notary Public without
           disclosure in a public deed or by registration.

           When the foundation charter is executed in languages other than Spanish, its
           translation into Spanish must also be transcribed into the public deed by the Notary
           Public for registration.22 Other foundation documents which do not need registration
           may be executed in any language.

i.         Is a private foundation allowed to trade?

           Foundations may engage in trading from time to time or exercise rights deriving from
           the ownership of business capital, when such capital constitutes a part of the
           Foundation assets. However, the economic consequence of the ownership of such
           business capital must comply with the stated objectives of the Foundation. 23

j.         Is there a statutory limit to the duration of a private foundation?

           No. Foundations have perpetual duration unless provided otherwise in its charter. 24


21
     Private Foundation Law, article 5. Executive Decree 417, article 3.
22
     Private Foundation Law, article 6.
23
     Private Foundation Law, article 3.
24
     Private Foundation Law, article 5.

08.08.2011
                                                                                                   8


                              5. Termination and migration of private foundations


a.         In which ways can a private foundation be terminated (dissolution, revocation,
           transformation…)?

           This is an example of a question where more information could be provided. The
           foundation shall be dissolved by reason of:

           1. The ocurrence of the date specified in the foundation charter for its termination.

           2. The performance of the purposes for which it was formed or the impossibility of
           said performance.

           3. Insolvency, cessation of payments or judicial declaration of bankruptcy at the
           instance of creditors.

           4. The total loss or exhaustion of the property of the foundation.

           5. Its revocation.

           6. Any other cause set forth in the foundation charter or in this Law. 25

b.         Can a private foundation from your jurisdiction migrate to another jurisdiction?
           Briefly discuss the relevant rules.

           Foundations formed under this law, as well as the property comprising their
           endowment, may move or subject themselves to laws and jurisdiction of another
           country, in accordance with their foundation charters or their regulations. 26

c.         Can private foundations migrate into your jurisdiction?

           Foundations which migrate into Panama must submit a certificate of continuation,
           which must contain the name of the Foundation, its date of formation, information
           pertaining to the registration of the Foundation in its original place of formation,
           declare its intent to continue in existence under Panama law, and all of the items
           required for a foundation charter under Panama law. 27 The certificate must be
           accompanied by a copy of the original foundation charter and any amendments, as
           well as a power of attorney in favour of a Panama lawyer. 28

           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. 29
25
     Private Foundation Law, article 25.
26
     Private Foundation Law, article 32.
27
     Private Foundation Law, article 29.
28
     Private Foundation Law, article 30.
29
     Private Foundation Law, article 31.

08.08.2011
                                                                                                 9




d.           Can the Founder choose a foreign law to govern the constitution of a private
             foundation?

             No. The Law only provides that foundations formed under the Private Foundation
             Law, as well as the property forming their endowment, may move or subject
             themselves to laws and jurisdiction of another country, in accordance with their
             foundation charters or their regulations. 30


                                             6. The dramatis personae


a.           Founder

i.           Who may act as the Founder? Is a nominee Founder permitted?

             Any individual or entity may act as founder. The law has no prohibition of nominee
             founders.

ii.          May the Founder reserve specific rights? Which rights does he enjoy by law?

             The Founder can reserve specific rights by executing the foundation charter with
             reservations of the right to:

             1.    amend the foundation charter when deemed convenient,31

             2.   remove members of the foundation council or to appoint or add new
             members. 32

             By law the founder enjoys the right to petition for judicial removal of members of the
             Foundation Council. 33

iii.         May he amend any provisions of the private foundation at a later time (e.g. the
             provisions of the by-laws)?

The Founder can amend the foundation charter at a later time by executing a foundation
      charter with said right.34

             Amendments to the foundation charter, when they are permitted, must be effected
             and signed in accordance with procedures provided in the charter. The agreement,
             resolution or act of modification shall contain the date on which it was executed, the
             clearly identifiable name of the person or persons who signed it, and their signatures,

30
       Private Foundation Law, article 32.
31
       Private Foundation Law, article 5.
32
       Private Foundation Law, article 21.
33
       Private Foundation Law, article 22.
34
       Private Foundation Law, article 5.

08.08.2011
                                                                                              10


           which shall authenticated by a notary public in the place where the instrument was
           signed. 35

           The Private Foundation Law has no specific prohibition to amend the by-laws at a
           later time.

b.         Beneficiaries

           i.     What are the types of Beneficiaries (fixed, discretionary, other)?

           The law has no prohibitions as to types of Beneficiaries. The Private Foundation Law
           only states that the foundation charter must include:

           1. The manner in which the beneficiaries of the foundation shall be appointed,
           among which the founder may be included.

           2. The destination to be given to the assets of the foundation and the method of
           liquidation of its patrimony in case of dissolution. 36

           ii. Must the foundation's objects include a reference to individual beneficiaries (or
           families) and are non-charitable purposes also permitted in a private foundation?

           No reference to individual beneficiaries (or families) is necessary and general
           descriptions of a class of beneficiaries are allowed, Non-charitable purposes are also
           permitted in a private foundation. A foundation with non-charitable purposes is
           allowed under the Private Foundation Law to have a class of beneficiaries defined in
           its charter or no beneficiaries when there is such a purpose to the foundation (such
           as operating a historical property for the public good). Foundations may from time
           to time engage in commercial activities or exercise ownership rights over business
           enterprises forming part of the endowment of the foundation, provided that the
           result or economic proceeds of such activities are applied solely for the purposes of
           the foundation.37

           Would a foundation that only pursues non-charitable purposes without beneficiaries
           be permitted ?

           iii. Do the Beneficiaries have an enforceable claim to a distribution of the
           foundation’s assets?

           Yes. Does that include discretionary beneficiaries ?

           iv. Do the Beneficiaries have a right to object to the decisions of the Foundation
           Council regarding their beneficial entitlement?



35
     Private Foundation Law, article 8.
36
     Private Foundation Law, article 5. Executive Decree 417, article 3.
37
     Private Foundation Law, article 1.

08.08.2011
                                                                                                   11


           A beneficiary may object to Foundation activities that jeopardize his/her rights or
           interests by complaining to the Protector or supervisory body. When there is no
           Protector or supervisory body, beneficiaries may initiate judicial action before a court
           of appropriate jurisdiction. These are in personam actions. 38.

           v. Are the Beneficiaries entitled to revoke / vary the foundation?

           No. The heirs of the founder have no right to revoke a foundation or transfers to it,
           even when the foundation charter has not been filed in the Public Registry prior to
           the death of the founder. 39

           vi. Do Beneficiaries have rights against the Foundation Council or the Foundation
           Council members? If so, do their rights act in personam or in rem against the
           foundation property?

           A beneficiary may object to Foundation activities that jeopardize his/her rights or
           interests by complaining to the Protector or supervisory body. When there is no
           Protector or supervisory body, beneficiaries may initiate judicial action before a court
           of appropriate jurisdiction. These are in personam actions. 40

           vii. Do the Beneficiaries have a right to dismiss Foundation Council members and, if
           yes, for what reasons, and who may appoint successors?

           Beneficiaries may ask a judge to remove a foundation council member acting against
           the interests of the foundation and its purposes. If nothing is provided in the
           Foundation charter or regulation regarding the circumstances under which members
           of the Foundation Council may be removed, the law states that they be removed
           through judicial proceedings for the following causes:

           •      If council members’ interests conflict with the interests of the beneficiaries or of
                  the Founder;

           •      If council members do not administer the assets of the Foundation with the
                  requisite diligence; or

           •      If the council member is charged with a crime against private property or public
                  trust (in Spanish fé pública) (?), in which case the member will be suspended for
                  the duration of the trial;

           •      If the council members lacks capacity or is unable to carry out the purposes of
                  the Foundation, from the time such causes arise.

           •      For insolvency or bankruptcy proceedings.



38
     Private Foundation Law, article 26.
39
     Private Foundation Law, article 13.
40
     Private Foundation Law, article 26.

08.08.2011
                                                                                                12


            The court judgment decreeing such removal should also appoint replacement council
            members. The new members must be persons with capacity and qualifications for
            the position. Furthermore, they must have proven moral character to be entrusted
            with the Foundation assets. 41

            viii.What are the obligations of Foundation Council members to provide
            Beneficiaries and others (e.g. Protectors) with copies of the accounts, foundation
            documents, other information and documents relating to the foundation?

            The Foundation Council must keep beneficiaries informed of the administration of
            foundation, unless the charter or regulations provide otherwise. If the Foundation
            charter or regulations contain no mention of the frequency with which this shall be
            done, the rendering of accounts must be made annually. When no objection is raised
            to the accounts within the time specified in the Foundation charter or its regulations,
            or, if the charter does not regulate the matter, such accounts will be deemed to have
            been approved 90 days from the date the accounts were received. When the
            accounts have either been approved, or the 90-day period has elapsed, the
            Foundation Council will bear no liability for their administration, unless they have
            failed to act with diligence. The above-mentioned approval does not exempt the
            Foundation Council in instances of negligence or fraud in the administration of the
            Foundation. 42

            ix. Can Beneficiaries or others pursue a claim when the assets of a foundation are
            mixed with other assets by the Foundation Council?

            This type of claim is not excluded when said commingling affects the purposes of the
            Foundation.

c.          Foundation Council

i.          Who may be appointed to the Foundation Council? Can only individuals be
            appointed or are also corporate members permissible?

            Any individuals or corporate members may be appointed.

ii.         What are the duties of the members of the Foundation Council?

            The Foundation Council is responsible for ensuring that the purposes of the
            Foundation are carried out. Except where the Foundation charter or regulations
            require greater or lesser responsibility, the Foundation Council will have the
            following general obligations and duties:

       •    To administer Foundation assets in a manner consistent with the Foundation’s
            charter or its regulations;
       •


41
      Private Foundation Law, article 23.
42
      Private Foundation Law, article 20.

08.08.2011
                                                                                               13


        •    To perform acts, enter contracts and/or conduct lawful business which advances the
             interests and accomplishes the purposes of the Foundation within the law;

        To keep the Foundation’s beneficiaries apprised of the economic state of the
        Foundation;

        •    To deliver the Foundation assets to the beneficiaries in the manner described in the
             Foundation’s charter or regulations, and

        •    To carry out all such acts or contracts which are allowed to the Foundation under the
             present law and any other applicable legal or regulatory provisions. 43

iii.         What standards of care are laid down in law to measure the performance of
             Foundation Council members? Do the Council Members owe their duties to the
             foundation itself or to the Beneficiaries?

             The law has no express standard of care for foundation council members except for
             the reasons which can justify a request for their removal. Unclear, please expand.
             Council members owe their duties to the foundation itself, but beneficiaries retain a
             right to request their removal for failure to comply with the purposes of the
             foundation.

iv.          Is there a residency requirement for Foundation Council members? If not, are there
             any other restrictions as to who may act as a Foundation Council member?

             No.

v.           Are there any restrictions on having non-resident Foundation Council members?

             No.

vi.          Is the use of nominees permitted?

             The law contains no prohibition of nominees. The scope of their relationship is that
             allowed by private agreement.

vii.         If the Foundation Council fails to take a relevant matter into account when
             administering the foundation, can an appeal be made to the court to put matters
             right? Who can make the appeal?

             Yes. The beneficiaries or the founder. 44

viii.        Does the court (or other supervisory authority) have the power to release members
             of the Foundation Council from liability for breach of their duties?



43
       Private Foundation Law, article 18.
44
       Private Foundation Law, article 22, 23, 26, 36.

08.08.2011
                                                                                               14


            No. Limited release is granted to foundation council members when their rendering
            of accounts is approved by the beneficiaries or 90 days elapse from its rendering. 45

ix.         Reporting requirements to the Registrar, Founder or any other party?

            Changes to the charter must be reported to the Registrar. 46

x.          Have there been any recent court cases against professional service providers
            which deal with their conduct?

             No recent court cases against professional service providers which deal with their
            conduct regarding the formation or management of foundations have been
            published.


                                                       7. Protectors (or similar)


a.          What specific rules are there relating to Protectors? If none, how does general law
            treat them?

            The law only states that the foundation charter or regulations may require that
            members of the Foundation Council must obtain previous authorization of a
            protector, committee or other supervisory entity appointed by the Founder in order
            to exercise their powers. A beneficiary may object to Foundation activities that
            jeopardize his/her rights or interests by complaining to the protector or supervisory
            body. 47

b.          Are Protectors frequently used in relation to foundations? Is their function different
            from that of trust protectors?

            No. No.

c.          Are Protectors regarded as fiduciaries and thereby liable to Beneficiaries if proper
            care is not exercised by them?

              Yes.


                                                   8. Foundation Governance


a.          Internal & external foundation governance: which organs supervise private
            foundations and hence implement foundation governance?


45
      Private Foundation Law, article 20.
46
      Private Foundation Law, article 6.
47
      Private Foundation Law, article 19, 24 and 26.

08.08.2011
                                                                                             15


             The law provides that the Foundation charter or regulations may create supervisory
             bodies and determine their powers. The supervisory bodies may be composed of
             individuals or entities, such as auditors or protectors. The Foundation charter or
             regulations may provide that disputes be resolved by local or international
             arbitration, as well as the rules under which they may be conducted.48


                                              9. Foundation assets


a.         Is it possible for a Founder to add assets to the minimum capital of a private
           foundation during its existence and can capital be withdrawn?

           Yes. The founder or a third party may periodically add funds or other property to the
           endowment. 49

           The Private Foundation Law has no express prohibition to withdrawal of capital.
           However, members of the Foundation Council must comply with their obligations to
           the beneficiaries of managing foundation assets with a standard of care.50

b.         What type of assets can be transferred to a private foundation?

           Any which are not prohibited by law. The Private Foundation Law specifies that the
           endowment of the foundation may arise from any lawful business and may consist of
           property of any nature, whether existing currently or in the future.51

c.         How is this transfer effected? When is it completed? Any specific requirements?

           The transfer is made and completed by any means acceptable under the law of
           where the asset is located. The Private Foundation Law specifies that property may
           be transferred to the endowment of the foundation by a public or private document.
           However, if real property is transferred, the transfer shall comply with the
           requirements for the conveyance of real property. 52


                                           10. Foundation investments


a.         Do Foundation Council members have complete freedom to invest the foundation
           assets at their discretion in the absence of specific provisions in the foundation
           documents?

           The Private Foundation Law does not provide specific parameters to invest
           foundation assets but do not allow complete freedom. The foundation council is
48
     Private Foundation Law, article 36.
49
     Private Foundation Law, article 16.
50
     Private Foundation Law, article 20.
51
     Private Foundation Law, article 16.
52
     Private Foundation Law, article 16.

08.08.2011
                                                                                               16


           responsible for the achievement of the purposes or objectives of a foundation.
           Unless otherwise provided in the foundation charter or in the regulations of a
           foundation, the foundation council shall have the following general obligations and
           duties:

           1. To administer the property of a foundation according to the foundation charter
           and its regulations.

           2. To perform acts, enter contracts and/or conduct lawful business which advance
           the interests and accomplish the purposes of the Foundation within the law,
           morality, good practice and ordre public.

           3. To inform the beneficiaries of the foundation of the condition of its endowment in
           accordance with procedures formed in its foundation charter or its regulations.

           4. To deliver to the beneficiaries of the foundation the property or resources to which
           they are entitled, as stated in its foundation charter or its regulations.

           5. To perform the acts or contracts that this Act and other applicable legal provisions
           or regulations permit to the foundation. 53

b.         To what extent are foundation investments regulated?

           No specific regulation.

c.         What is the standard of care when making foundation investments for a foundation
           and have there been any recent cases?

           The Private Foundation Law requires that the Foundation Council members perform
           any transactions to achieve the purposes of the foundation as long as they are not
           contrary to the law, morality, good customs or ordre public.54

           However, the law mentions failing to maintain the standard of care of a bonus pater
           familias (in Spanish buen padre de familia) - the average standard of care observed
           by an average person - as cause for removal. The law specifically provides that the
           members of the Foundation Council may be removed judicially:

                 •    Anytime if they manage the foundation assets without the diligence of a
                      bonus pater familias.55

           •      If they have not managed the foundation assets with the diligence of a bonus
           pater familias, even if more than 90 days have elapsed after approval of their annual
           rendering of accounts. This approval does not exempt them from liability to the
           beneficiaries or third party stakeholders for damages caused by gross negligence (in


53
     Private Foundation Law, article 18.
54
     Private Foundation Law, article 18.
55
     Private Foundation Law, article 22.2.

08.08.2011
                                                                                               17


           Spanish culpa grave) or fraud (in Spanish dolo) in the management of the
           foundation.56

           No recent court cases have been published regarding the specific issue of making
           foundation investments for a foundation [.]: I suggest: The standard of care is that of
           a prudent businessman. There have been no recent cases.




                                                             11. Taxation


a.         Does your jurisdiction levy capital gains or gift tax on the Founder when assets are
           passed to the private foundation?

           No, so long as assets are located abroad or – when located in Panama – the
           beneficiary is the spouse or a relative within one degree of consanguinity of the
           Founder.

b.           Is a stamp duty or similar tax imposed when property is passed to the foundation?

           No, so long as the assets are located abroad.

c.         Annual taxation of the private foundation - is there a lump-sum taxation or other
           tax benefits?

           A lump-sum US$400 tax is the only taxation57, so long as the assets are located
           abroad.

           Private foundations with assets located in Panama are also subject to the normal 30%
           tax applicable to all legal entities. This income tax is levied on net taxable income
           from local sources after deducting allowable expenses. 58


d.         Are distributions to Beneficiaries taxable?

           As a general rule, distributions to beneficiaries from sources outside of Panama are
           not subject to taxation. The Private Foundation Law specifies that the formation,
           modification or dissolution of a foundation, as well as the transfer, assignment or
           encumbrance of the foundation property and the income derived therefrom or any
           other action with reference thereto, shall be exempt from all duties, contributions,
           taxes, encumbrances or payments of any class or kind, whenever such property is
           comprised of:


56
     Private Foundation Law, article 20.
57
     Tax Code, article 318A.
58
     Private Foundation Law, article 8. Tax Code, article 700.

08.08.2011
                                                                                                 18


           1. Property located outside of Panama.

           2. Money deposited by individual or entities which income is not earned from a
           Panamanian source or not taxable in Panama for any reason.

           3. Shares or bonds of any kind issued by corporations which income is not earned
           from a Panamanian source or which income is not taxable for any reason, even when
           such shares or bonds are held in the Republic of Panama.

           The transfer of real property, titles, certificates of deposit, bonds, money or shares
           made to perform 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, are also be exempt from all taxation.59

e.         Does a private foundation qualify for treaty benefits under any DTT concluded by
           your jurisdiction?

           Yes.

                                           12. Asset Protection


a.         Does your local law contain any specific asset protection legislation?

           Asset protection legislation is included in the provisions of specific laws for entities,
           such as the law on private foundations and the law on corporations.

b.         What measures have been enacted to preserve the integrity of a private foundation
           against hostile attacks?

           The Foundation law provides that the assets of the Foundation constitute an estate
           separate from the personal assets of the Founder for all legal purposes. As a separate
           estate, Foundation assets cannot be seized, attached or made subject to any
           precautionary action or measure with respect to actions undertaken by the Founder,
           council or beneficiaries. 60

c.         When, if at all, can creditors attack the foundation assets directly instead of taking
           personal action against the Founder?

           Creditors and plaintiffs may only seize Foundation assets when the Foundation has
           itself incurred a liability, or caused damage in attempting to carry out the Foundation
           objectives. In no case can such assets be affected or used to satisfy the personal
           obligations of the Founder or beneficiaries. 61

d.         What rules relating to fraudulent conveyance and action paulienne exist?

59
     Private Foundation Law, article 27.
60
     Private Foundation Law, article 11.
61
     Id..

08.08.2011
                                                                                                                                   19




           The Founder creditors can contest a transfer of assets to a Foundation when the
           transfer has been made to defraud creditors. However, this right expires 3 years after
           the date of the transfer in question. 62

           Panama law allows action paulienne to be exercised. The Civil Code provides that if a
           defendant is insolvent and the assets seized are insufficient to satisfy the claims of
           the plaintiff, action paulienne may be exercised. Creditors who have pursued all
           assets in possession of the debtor to satisfy the debt, may exercise all rights and
           actions for said purpose, except those inherent to inherent to its person, and may
           also challenge the actions performed by the debtor to defraud its right. " 63

e.         Have there been any recent cases in this area of law?

           The legality of action paulienne was upheld by the Panama Supreme Court, when a
           creditor tried to challenge the constitutionality of the previous requirement of having
           to pursued all assets in possession of the debtor to satisfy the debt. The Supreme
           Court recalled that its Civil Section has pointed out that one of the requirements for
           the creditor to attack the act of a debtor, in order to satisfy its right, is that the
           debtor lack any other assets for the creditor to be satisfied, i.e. that it lacks other
           means of collection. It is also required that the act have been carried out with fraud
           (in Spanish dolo), both by the debtor and the third party. The insolvency of the
           debtor and the intent must be proven for the Action Paulienne to be successful. 64

           With regards to the insolvency of the debtor, the Civil Section deemed in decision of
           January 5, 2001, that according to the purpose in article 996 of the Civil Code “… a
           previous procedure is not absolutely necessary to determine the absence of debtor
           assets, that is, its insolvency, but only for the deceived creditor to prove, in any
           mannet, in the same Action paulienne procedure, that is not possible to obtain
           performance of its credit for other means due to the insolvency of the debtor, which
           has forced the request of the revocation of the fraudulent act. 65

           The Civil Section of the Supreme Court decided on the request by a shareholder of
           several corporations to have the Public Registry make a notation of his lawsuit
           challenging the sale of several properties by said corporations to private foundations.
           The plaintiff filed a lawsuit against the corporations and the buyer private
           foundations in order to have a court declare the nullity of the shareholder meetings
           where the sales had allegedly been approved, which included a sale to Fundacion
           Liberacion (which in turn donated the property Fundacion Sierra Maestra), the
           transfer of a property as payment in kind by Fundacion Sierra Maestra to another
           corporation. 66



62
     Private Foundation Law, article 15.
63
     Civil Code, article 996.
64
     Decision September 5, 2012, Supreme Court of Justice of Panama en banc, Inconstitutionality Action within the Ordinary Procedure
     (Action Paulienne) of M.E.A.G. against the Estate of T.A.G. (R.I.P.). File 267-09.
65
     Id.
66
     Decision April 21, 2010, Supreme Court of Justice of Panama Civil Section, Cassation Action within the Ordinary Procedure of C.W.
     against L., S.A. et al. File 212-08.

08.08.2011
                                                                                                                                     20


           The Civil Section did not render an opinion on the validity of these transfers, limiting
           itself to holding that the plaintiff lawsuit does not deserve its notation in the property
           registry entries of the properties mentioned, because the actions by the shareholder
           are not in rem claims, since there is no direct relationship between the shareholder
           plaintiff and the individual properties owned by the corporations. Instead this is an
           in personam action as shareholder against the corporations which shares he holds. 67

           Even though foundation assets cannot be seized, attached or made subject to any
           precautionary action or measure with respect to actions undertaken by the Founder,
           council or beneficiaries, the Supreme Court has held that this does not give absolute
           immunity to private foundations so that they can never be sequestered or seized.
           The Supreme Court upheld the seizure of foundation assets of a founder who as an
           individual had allegedly damaged the reputation of the plaintiff. The plaintiff was a
           bank which posted a bond for damages to the foundation and court costs which said
           seizure may cause if a final judgment results in a decision against the plaintiff. The
           defendant was the founder of Fundacion Geelong who had commented on he
           Internet about the customer service provided by the bank.68 This precautionary
           measure may be decreed by a judge before a complaint is filed upon posting of a
           bond for 10-20% of the amount claimed.
            Answer missing.


                                          13. Foundations as will substitutes


a.         If an inter vivos private foundation is used as an alternative to a will, what
           precautions must be observed to prevent the foundation document being regarded
           as an invalid will and defeating the foundation?

           An inter vivos private foundation is subject to the formalities of notarization and
           registration as a normal charter. Charters of post mortem foundations which
           become valid upon the death of the founder are not required to follow the same
           formalities as a will under the Civil Code.69

                                                      14. Forced heirship


a.         Are there provisions which protect foundation assets from forced heirship claims
           originating from a different jurisdiction, or to what extent are such claims
           recognized?

           The legal provisions regarding inheritance in the domicile of the Founder or
           beneficiaries shall have no effect or impact on a Foundation. The law of foreign



67
     Id.
68
     Decision of July 17, 2008, Supreme Court of Justice of Panama Civil Section, Cassation Action within the Ordinary Procedure of HSBC
     against Fundacion Geelong. File 36-07.
69
     Private Foundation Law, article 4.

08.08.2011
                                                                                                21


           jurisdiction will not prevent the performance of the Foundation’s purposes as they
           are set forth in the Foundation charter or regulations. 70

b.         Have there been any recent cases on forced heirship claims against private
           foundations?

           No recent court cases regarding the specific issue of forced heirship claims against
           private foundations have been published..

c.         After which time, if at all, are forced heirship claims precluded?

           Since the legal provisions regarding inheritance in the domicile of the Founder or
           beneficiaries shall have no effect or impact on a Foundation, the issue of preclusion is
           not applicable to forced heirship cases.


                                               15. Divorce


a.         Are there provisions which protect foundation assets from claims in foreign divorce
           proceedings? Are there any time limits involved?

           The Founder creditors can contest a transfer of assets to a Foundation when the
           transfer has been made to defraud creditors. However, this right expires 3 years after
           the date of the transfer in question. 71

b.         Have there been any recent cases on this?

           No recent court cases regarding the specific issue of protecting foundation assets
           from claims in foreign divorce proceedings have been published.




                                           16. Sham foundations


a.         Is there a similar concept applied to foundations in your jurisdiction?

           No.

b.         What protection is granted to defeat claims from outside the jurisdiction that a
           foundation is a sham?




70
     Private Foundation Law, article 14.
71
     Private Foundation Law, article 15.

08.08.2011
                                                                                              22


           The Foundation law provides that the assets of the Foundation shall constitute an
           estate separate from the personal assets of the Founder for all legal purposes. 72

c.         What are the consequences of a foundation being found to be a sham? Is there a
           piercing of the corporate veil or some similar doctrine?

        Creditors and plaintiffs may only seize Foundation assets when the Foundation has
        itself incurred in liability, or caused damage in attempting to carry out the
        Foundation’s objectives.73 In practice, attempts to have a a foundation deemed as a
        sham are not likely to succeed before a local judge. The Panama Private Foundation
        Law allows the founder to serve as foundation council member and beneficiary 74,
        thereby reserving himself a high degree of control over the foundation assets, with
        regard to the management and administration of the endowment, the making of
        loans, gifts and investments. Alleging absolute control by the founder is insufficient
        by itself to pierce the foundation veil. A combination of precautionary measures
        guaranteed by a bond and legal action based on revocation through Action paulienne
        of fraudulent transactions within the 3-year period to challenge them are necessary
        to successfully pierce the foundation veil.
 I think that the question of sham could be discussed under various aspects, eg. substantive
        sham like in Rahman.


                                        17. Combating the abuse of foundations


a.         Is your jurisdiction rated as meeting the OECD standards for information exchange
           in tax matters?

           Panama is in the White List meeting the OECD standards for information exchange in
           tax matters and is a member of the OECD Global Tax Forum.

b.         Has your jurisdiction recently introduced legislation or regulations concerning the
           exchange of information with other jurisdictions? Under which circumstances is
           information exchanged, for example on the founder or the beneficiaries?

           Exchange of information provisions are included in:

           1. Double taxation agreements for air and shipping matters with major shipping
           powers,

           2. Mutual Legal Assistance Treaties with the U.S., Russia, and several OECD and Latin
           American countries,

3.         Tax Information Exchange Agreement with the U.S.,


72
     Private Foundation Law, article 11.
73
     Id.
74
     Private Foundation Law, articles 5.3 and 5.7.

08.08.2011
                                                                                                                                          23


4.         Double taxation agreements modelled on the OECD Draft Agreement.75

           8 double-taxation agreements are in force with Mexico, Barbados, Qatar, Spain,
           Luxembourg, Netherlands, Singapore, and France. Panama has also ratified double
           taxation agreements awaiting ratification by Italy, South Korea and Portugal, and
           signing is pending for 5 agreements negotiated with Czech Republic, Belgium, Israel,
           Bahrein, and United Arab Emirates.

           Cooperation by local authorities is subject to the requesting authority fulfilling the
           provisions of Law 33 of 201076 as provided for in Executive Decree 85 of 2011,
           whereby the procedures for exchange of information under tax treaties are
           regulated.

           Article 5 of the Panama-U.S. Tax Information Exchange Agreement makes express
           reference for information to be exchanged on the founder or the beneficiaries but a
           request must first meet the requirements of a very detailed questionnaire under
           Executive Decree 85.

c.         How (if at all) are professional service providers regulated? Is there any legislation
           or guidance on the regulation of professional service providers? (Please provide
           details of any useful websites).

           Professional service providers are regulated under Law 9 of 1984, Executive Decree
           298 of 1994 and Law 2 of 2011 for resident agent lawyers.

           Law 9 of 1984 regulates service providers of the legal profession.77 The law states
           that only attorneys accredited in Panama may engage in:

           “4. Preparation of legal documentation related to formation, perfomance and
           liquidation of companies.
           5.Drafting of all kinds of contracts…
           7.Registration of documents in the Public or Civil Registry and the actions, challenges
           and claims arising from the objection and remedying of said documents…
           9.Serving as Resident Agent for purposes of the corporation law.
           10. Any other activity or action not expressly mentioned in this article for which
           serving as a lawyer is required.” 78

           The Supreme Court of Justice grants accreditation to practice law solely to
           Panamanian citizens who have earned a law degree from a law school acknowledged
           by the University of Panama. 79


75
     See       Ministerio      de     Economia        y      Finanzas,     Convenios       para     Evitar     la     Doble       Tributacion,
     http://www.dgi.gob.pa/documentos/doble_tributacion/listado_convenios.pdf (last visited Feb. 12, 2012) for updated list of agreements.
76
     Ley No. 33, 30 Jun. 2010, Que adiciona un capítulo al Código Fiscal sobre normas de adecuación a los tratados o convenios para evitar
     la Doble Tributación Internacional y adopta otras medidas fiscales [Whereby a chapter of the Tax Code on implementation of
     international doble taxation avoidance treaties or agreements is added and other tax measures are adopted]. Gaceta Oficial [G.O.] 26656-
     A, 30 Jun. 2010 (Pan.).
77
     Ley No. 9 de 1984 Por la cual se regula el ejercicio de la Abogacía (hereinafter “Law 9 of 1984”).
78
     Law 9 of 1984, article 4.
79
     Law 9 of 1984, article 3.

08.08.2011
                                                                                                 24


           Membership in the Panama Bar Association is not compulsory, yet its Honor Tribunal
           has competence to hear complaints by customers for violations of the Code of Ethics.
           80
              The Code of Ethics sets out guidelines for confidentiality, conflict of interest and
           other aspects of the attorney-client relationship. 81

           The Panama Private Foundation law required that resident agents follow all legal
           provisions contained in said Executive Decree 468 to avoid the unlawful use of said
           entity, as well as any other rule in force aiming at fighting money laundering related
           from drug-trafficking.82 The decree was later subrogated by Law 2 of 2011. 83

           Useful websites are:

www.cnapanama.com/leyes.htm Panama Bar Association, which has the text of the
     requirements to be accredited as lawyer.

www.uaf.org.pa Financial Analysis Unit under “Disposiciones legales”

www.superbancos.gob.pa/en/prev-cont-il-op Superintendent of Banks for trustees

d.         KYC requirements: what reporting or other requirements (if any) are imposed on
           professional service providers under anti-money laundering regulation when
           forming a new private foundation or while administering an existing private
           foundation?

           Resident Agents are required to maintain in their confidential files copy of the
           identification, banking or professional references, bill showing address and other
           documents that will identify the founder and parties of the foundation, or an affidavit
           from a regulated intermediary that similar documents are being kept and will be
           made available in case of an investigation properly conducted under international
           conventions.

           Any registered agent is required to apply KYC measures, under which the customer
           will be asked to provide satisfactory evidence of his identity; when the customer acts
           on a third party’s behalf, he shall provide satisfactory evidence of said third party. 84

           The registered agent will not require information from the third party on behalf of
           whom the customer is acting for, when he is certain that the customer is a legal
           entity member of a professional organization which conducts or practices
           professional and ethical standards for the prevention and detection of money
           laundering, combat of terrorism, and any other illegal activity in terms no lesser than
           those required pursuant to Law 2 of 2011, such as law firms, banks, trust companies,
           insurance companies, brokerage houses, and certified public accountants.



80
     Law 9 of 1984, article 21.
81
     Code of Ethics and Professional Responsibility, G.O. 26796 31 de mayo de 2011..
82
     Private Foundation Law, article 34.
83
     Law 2 of 2011, article 33.
84
     Law 2 of 2011, article 6.

08.08.2011
                                                                                                25


           In these cases, and pursuant to the provisions of this law, the registered agent shall
           obtain and maintain in his files, at least the following customer information:

           1. Full name.

           2. Place and date of incorporation.

           3. Physical address.

           4. P.O. box address, if different from the physical address.

           5. Phone number.

           6. Fax number, if any.

           7. Name of the legal representative or person in charge of its management.

           8. E-mail address of the legal representative or person in charge of its management.

           9. Core business activity.

           10. Proof of its existence.

           11. Customer’s declaration about the activity the entity will be engaged in. This
           information must be requested for each corporation for which the customer requires
           the registered agent’s services.

           12. Confirmation that the customer:

           a. Has a business relationship with the person on behalf of whom he is requesting
           the registered agent’s services.

           b. Practices KYC measures, which require him to have information about the identity
           of the third parties on behalf of whom he is requesting the registered agent’s
           services in connection with one or more entities, even though when the share
           certificates representing the title deed of the entity are issued to the bearer.

           c. If required by the registered agent, the customer shall provide information
           regarding the identity of the customer on behalf of whom he is acting, according to
           the requirements and procedures established in the legislation of the jurisdiction
           where the operations are performed. 85

           In attention to the attorney-client professional privilege, the lawyer is not subject to
           provide any information or documents required by this Law which are subject to a
           legitimate professional privilege, unless said information limits itself solely to that
           required under KYC duties.


85
     Law 2 of 2011, article 7.

08.08.2011
                                                                                                                                  26


           The right to require information by the competent authority is not deemed as an
           authorization to inspect the offices of the resident agent or to seize files or filing
           media. These actions by the competent authority must be carried out pursuant to
           corresponding laws for said purposes, set out in Panamanian ordinary law. 86

e.         What are your most recent anti-money laundering measures and have there been
           any anti-money laundering prosecutions in connection with a foundation?

           The most recent anti-money laundering measures is Law 2 of 2011 previously
           mentioned. Previously, the Criminal Code was revised in order to include the current
           definition of money laundering and impose penalties of 5 to 12 years of
           imprisonment. This version of the Code punishes those who knowingly participate in
           laundering of proceeds from crimes related to production, traffic, consumption of
           drugs or any drug-related crimes, international bribery, crimes against humanity or
           intellectual property, financial crimes, murder for hire or bounty, environmental
           crimes, illegal enrichment, terrorism or financing thereof, child pornography or their
           corruption, aggravated fraud, kidnapping, blackmail, embezzlement, corruption of
           public officials, terrorism, and illegal trafficking of weapons, persons or vehicles. 87

           The Criminal Code incorporated the definition of money laundering under Laws 41
           and 42 of 2000 which had expanded the penalties for money laundering to those
           who aid and facilitate said crimes (among them casinos, remittance (debt
           collection ?) companies)).88

           The Supreme Court en banc (? ) upheld on May 4, 2011 a decision on provisional
           measure against a resident agent attorney as part of an anti-money laundering
           prosecution in connection with a foundation. The attorney had filed a writ of habeas
           corpus against said measures to which the Special Prosecutor responded that the
           measures were justified because the attorney “not only acted as legal professional
           exercising his profession but also executed a number of actions which resulted in the
           registration, in irregular or illegal manner, of a foundation called Saint Tropez
           Foundation, but also, the same had a change of beneficiary who resulted to be the
           same person who granted [the attorney] power”. The Supreme Court deemed the
           measure to be made a competent authority against an individual accused of a
           financial crime pursuant to legal procedure and denied the habeas corpus.89


                                18. Useful sources/websites for further information

www.mici.gob.pa Ministry of Commerce & Industries, has a database of business entities.



86
     Law 2 of 2011, article 14.
87
     Ley No. 14 de 2007, Por la cual se adopta el Código Penal [Whereby the Criminal Code is enacted], articles 248 to 253. G.O. No.
     25,796, el 22 de mayo de 2007.
88
     Ley No. 42 de 2000, G.O. No. 24,152 del 2 de octubre de 2000. Ley No. 41 de G.O. No. 24,152 del 2 de octubre de 2000. Additional
     regulations for      financial service providers are posted          regularly by the Superintendent of              Banks in
     http://www.superbancos.gob.pa/es/regimen-antilavado.
89
     Decision May 4, 2011, Supreme Court of Justice of Panama en banc, Habeas Corpus Action filed by EAHC against the Special
     Prosecutor of Drug Matters. File 978-10.

08.08.2011
                                                                                             27


www.organojudicial.gob.pa Judicial Power, has a database of case law from courts of appeal
and Supreme Court dating back to 1993, graphical archives of older case books dating back
to the 1960s and a searchable database of attorneys accredited to serve as resident agents.

www.dgi.gob.pa Directorate General of Revenue receives online tax returns, has a database
of recent tax regulations, limited tax rulings and all double taxation agreements.

www.proinvex.mici.gob.pa Trade & Investment Promotion Agency provides reports on
Panama trade missions and exhibits abroad.


                               19. PRIVATE FOUNDATION FACTSHEET

JURISDICTION

Location                                            Southeastern Central America, bordering
                                                    with South America
Time zone                                           UTC -5
Travel to (airports)                                Direct flights to Madrid, Amsterdam,
                                                    Frankfurt, several U.S. hubs, and all Latin
                                                    American capitals
Language                                            Spanish. Several groups speak English,
                                                    Chinese, Hebrew, and Amerindian languages
Legal system (civil / common law)                   Civil Law
Special features / specialization /markets served   Logistics hub for transshipment of goods
                                                    between Americas, Asia and Europe
Position with OECD                                  Member of OECD Global Tax Forum and
                                                    White List.
List of TIEAs                                       U.S.
List of DTTs                                        Mexico,     Barbados,     Qatar,     Spain,
                                                    Luxembourg, Netherlands, Singapore, and
                                                    France in force. Panama has also ratified
                                                    agreements with Italy, South Korea and
                                                    Portugal, and awaits signing with Czech
                                                    Republic, Belgium, Germany, Ireland, Israel,
                                                    Bahrain, and United Arab Emirates.
Useful sources /websites                            ww.organojudicial.gob.pa, www.dgi.gob.pa,
                                                    www.mici.gob.pa, www.proinvex.mici.gob.pa

PRIVATE FOUNDATIONS

Types and principal uses                         Private Interest Foundation
Legal basis                                      Law 25 of 1995
How long does the formation take?                2 days
Costs of formation and annual costs              US$950 with 1st year, US$550 annual cost
Who may form a foundation?                       Anybody
Is the use of nominee founders possible?         Yes
KYC requirements?                                Identification, banking or professional
                                                 references, bill showing address
Are foundations registered upon formation?       Yes
Information available to Registrar and in Public Only name of founder and council
Register?

08.08.2011
                                                                                            28


What are the foundation documents?              Public foundation charter and private
                                                regulations
Minimum capital?                                US$10,000 or equivalent in any currency
Who may be appointed to the Foundation Anybody. 3 individuals or 1 entity. No
Council? Number of Foundation Council residency requirements. Nominees allowed
members? Residency requirements? Use of by private agreement.
nominees?
Permission to trade?                            Only occasional transactions required to fulfil
                                                its purposes
Who is the typical Founder? May he reserve No typical founder. It is customary to assign
specific rights?                                founder rights
Beneficiaries (types, right to information)     No prohibition on types of beneficiaries.
                                                Right to rendering of accounts at least
                                                annually
Protectors (specific rules)                     The law only states that the foundation
                                                charter or regulations may require that
                                                members of the Foundation Council must
                                                obtain previous authorization of a protector,
                                                committee or other supervisory entity
                                                appointed by the Founder in order to
                                                exercise their powers.      A beneficiary may
                                                object to Foundation activities that jeopardize
                                                his/her rights or interests by complaining to
                                                the protector or supervisory body
Tax (capital gains tax, annual taxation, stamp Private foundations not holding Panama
duties, application of DTTs, lump sum taxation, assets are exempt from Panama taxes
tax on distributions)
Treatment of forced heirship claims             Forced heirship claims cannot prevail over
                                                foundation distribution rules
Treatment of claims resulting from foreign Foreign divorce claims cannot prevail over
divorce proceedings                             foundation distribution rules
Specific asset protection legislation           Assets of the Foundation shall constitute an
                                                estate separate from the personal assets of
                                                the Founder for all legal purposes. As a
                                                separate estate, Foundation assets cannot
                                                be seized, attached or made subject to any
                                                precautionary action or measure with respect
                                                to actions undertaken by the Founder,
                                                council or beneficiaries
Measures to combat abuse of foundations (civil KYC regulations applicable to resident
and criminal concealment)                       agents, trustees and banks.            Criminal
                                                penalties against most forms of money
                                                laundering




08.08.2011

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:2
posted:3/12/2013
language:Unknown
pages:28
Description: Private foundations: A World Survey Panama (c) Alvaro Aguilar Alfu 2012