Panamanian Private Foundations by Alvaro Aguilar LOMBARDI AGUILAR & GARCIA Fax: +507 340-6446 Tel: +507 340-6444 Mobile: +507 6638-8707 Airmail address: P.O.Box 0831-1110, Panama 0831, Panama Courier address: Aquilino de la Guardia St. Ocean Business Plaza, 12th Floor, Panama City, Panama E-MAIL: aaguilar @ nysbar.com INTERNET: http://www.laglex.com PANAMANIAN PRIVATE FOUNDATIONS INTRODUCTION A Private Foundation is a legal entity with its own existence and identity, which is used for family, religious, public or charitable purposes and can not undertake commercial activities as a regular objective as they shall not be profit oriented. It may nevertheless engage execute commercial transactions and businesses necessary to carry on its objectives. Also, a Foundation can exercise shareholders' rights as owner of the shares of stock of a corporation that may be part of its assets. These foundations are of similar nature to the Stiftung from Liechtenstein. FORMATION The formation of a Private Interest Foundation is as simple and expedite as for the organization of a Panamanian offshore company. It can be created by one or more individuals or corporations, either directly or through a third party, usually, the Resident Agent of the Foundation, by means of the adoption of a deed which must be notarized and registered with the Public Registry. Once the deed is registered, the Foundation comes to life and is immediately able to comply with its objectives and may acquire and possess assets of any kind, contract obligations and be part in any administrative and judiciary process. The management and operation of the Foundation is not subject to the supervision of any authority. A Foundation will last either for the period stated in the statutes or when its purpose has been achieved. EFFECT OF THE FOUNDATION AFTER THE DEATH OF THE FOUNDER A Foundation can be created to become effective upon the death of the Founder, in which case the Founder does not have to comply with the requirements and formalities for the granting of a will. Also, the founder's heirs will not have the right to revoke the creation of nor object the assignment of properties to the Foundation. The law expressly states that the existence of legal provisions in the country of domicile of either the founder or the beneficiaries of the Foundation related to inheritance matters will not affect the validity of the Foundation; the assignment of estates to the Foundation nor the compliance or carrying on of its objectives. IRREVOCABILITY The Foundations will be irrevocable, except under any of the following circumstances: a. If the foundation deed has not been registered with the Public Registry; b. The foundation deed indicate otherwise. c. For any reason set forth in the Panamanian legislation to revoke a donation. d. Foundations created to take effect after the death of the Founder can be revoked by him at any time. Transfer of assets to the Foundation either by the founder or by a third party shall be irrevocable unless otherwise stated in the act or document of assignment. ESTATE OF A FOUNDATION The assets of a Foundation may be obtained as a result of any lawful act or transaction and may consist of properties of any nature, present or future, either real estate, securities, shares of stock, chattel of any nature and money, among others. The assets of a Foundation can be increased at any time. Once a Foundation has been formed, the founder must comply with his duty to transfer and deliver to the Foundation assets for a value equal to no less than U$10,000.00. The assets of the Foundation are a separate and independent estate from the founder's personal assets. Once the assets have been transferred to the Foundation, their property no longer belongs to the founder, therefore said estate can not be attached, seized or be subject to any lawsuit or legal actions as a result of obligations or liabilities of the founder or the beneficiaries of the Foundation. The creditors of a founder have the right to object or contest the creation of a Foundation or the transfer of assets should that represents a fraudulent action against their credits. The rights of the creditors will elapse in a period of three (3) years as of the registration of the foundation deed of the Foundation in the Public Registry. FOUNDATION COUNCIL All Foundations must have a Foundation Council or Board of Trustees, formed by individuals or business entities, which shall have the duty to fulfill the objectives and purposes set forth in the deed of formation. The members of the Council are appointed and replaced by the founder or his attorney-in-fact. TAX BENEFITS The law states that the organization of a Foundation; the amendment of its articles or its dissolution will not be subject to any type of tax, nor will the assignment, transfer or security of the assets of the Foundation. REDOMICILIATION OF FOUNDATIONS Foreign Foundations can be domiciled in Panama and adopt Law 4 as a governing legal provision by recording its foundation deed together with a good standing certificate issued by the country of organization and an affidavit by its Foundation Council stating the interest of the Foundation to continue existing now as a Panamanian Foundation. ABOUT THE AUTHOR: Alvaro Aguilar aaguilar @ nysbar.com is an attorney specialized in asset protection, taxation and other Business Law matters. This publication is provided by Lombardi, Aguilar & García, a Panama law firm with experience in intellectual property, licensing, business, administrative and commercial law.
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