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PANAMANIAN CORPORATIONS
Law 32 of 1927 contains the regulations and principles that regulate the creation and organization of Panamanian corporations. These, "the Panamanian corporations", have maintained and preserved its juridical personality, independent and separate from that of their shareholders and directors, through the institutionality that the use and mercantile practice, the law and legal precedents and principles of law have given it as a subject of rights and obligations. II. ORPORATE POWERS According to Law 32 of 1927, Panamanian corporations may carry out any and all type of lawful businesses and activities with no limitaitons whatsoever, even though such businesses and activities are not contained or described in their articles of incorporation. III. CAPITAL AND STOCK The capital stock of the corporation may be represented in any legal currency of any country (in shares, with a nominal value) or represented with non-par value shares of stock or in a combined formula, having both nominal or par value and non-par value stock. When the capital stock is to be represented by non-par value shares of stock, it shall be necessary to state the total number of shares of the corporation is authorized to issue. The capital stock of the corporations can be increased or reduced by resolution of its shareholders. Corporations may issue diferent kind and type of shares of stocks with its designations, preferences, privileges, voting rights and restrictions. Shares of stock with a nominal or par value must be issued for a price not less than its value. Non- par value shares of stock can be isseud for the price determinded by the Board of Directors from time to time. The shares of stock can be issued in a nominative form or to the bearer. Nominative shares of stock are to be registered in the stock register in order to be valid and effective. Bearer shares can be transferred by the mere delivery of the certificate. Shares of stock of corporations can be bought with money, properties, goods or services. Law 32 of 1927 does not require that all the registered capital be issued nor all or part of it to be paid for . Therefore, the capital of the corporation need not to paid at the time of incorporation. Thus, it is possible to have the corporation in existence without tying up funds. IV. THE BOARD OF DIRECTORS The Board of Directors must consist of at least three (3) persons of any nationality and domiciled in any country of the world. Juridical persons, like other companies, can also act as directors. The directors need not to be shareholders and they can hold meetings in any country and they may be represented by proxy. Meetings can be held through telephone conferences or by any cybernetic method. Subject to the articles of incorporation and the corporation law, the Board of Directors shall have control of the business of the corporation. The Board of Directors is elected by the shareholders but they (the directors) can fill the vacancies which occur in the Board due to resignations, retirement and other causes. This can be done by resolution passed at a meeting of the Board of Directors. V. OFFICERS Panamanian corporations must have at least a President, a Secretary and a Treasurer, which do not have to be directors nor sharehjolders. Additional officers can also be appointed, as Vice-Presidents, Assistant Secretaries, etc. Usually, the directors also act as officers ( i.e. Director-President, Director-Secretary and Director-Treasurer). Juridical persons, like other companies, can be appointed as offices. One person can hold more than one office. VI. THE SHAREHOLDERS The Assembly of Shareholders is the maximum authority of the corporation. They can meet upon summoning or by waiver of notice to the meeting signed by all the shareholders. They can be represented and vote by proxies. The meetings of shareholders may be held in any country if so determined by the articles of incorporation or the by-laws. The powers reserved by the law to the shareholders are: 1.
Amendment of the articles of incorporation. The totality of the shareholders may authorize in writing, without the necessity of a meeting, the amendment of the articles of incorporation, the dissolution of the corporation and the sale of its assets. VII. BOOKS AND CORPORATE SEAL Corporations may have a Stock Register and a Minutes Book or may keep the minutes and shareholding record by any electronical or cybernetic means. These records can be kept in any country, if so uthorized by the articles of incorporation or the by-laws. The name and domicile of the stockholder (except in the name of bearer shares) and the number of shares,date of acquisition and the amount paid for them have to be stated in the Stock Register. There is no public registration of shareholders required; this is confidential. Corporations having no activities within the Republic of Panama, are not obliged to keep accounting books in the Republic of Panama. If they use another country as a base of its operaions, they must comply with the regulations of such country. A corporate seal is not mandatory but optional, and any kind of seal can be adopted by the corporation. VIII. RESIDENT AGENT The Corporation Law establishes that every corporation must have a Resident Agent in Panama, which has to be either a lawyer or a law firm. Resident Agents are empowered by law to obtain notarization and registration of those corporate documents subject to registration at the Public Registry Office of the Republic of Panama. IX. TAXATION Taxation in Panama is based on the principle of territoriality; that is, income tax is levied exclusively upon net income derived from activities carried out within the territory of the Republic of Panama. Therefore, Panamanian corporations operating outside the Republic of Panama are not subject to income tax. The only tax to be paid by corporations with no activity in Panama is the Annual Corporate Tax or annual franchise tax, of US$ 300.00 ( with a surcharge of US$ 50.00 if not paid in due time ). Dividends arising from income obtained outside the territory of Panama are not subject to any tax. X. DISSOLUTION AND LIQUIDATION Panamanian corporations can be dissolved by resolutions of its shareholders. A list of the Directors and officers with their addresses together with the liquidation resolution must be recorded at the Public Registry Office. No list of shareholders is required. After dissolution, the corporation shall remain in force for three (3) years, only for the purpose of carrying out its liquidation, but it can not do any business. XI. ADVANTAGES OF PANAMANIAN CORPORATIONS 1. Setting up a corporation takes, once the required information is received, approximately 24 hours for its incorporation and three (3) working days to be registered at the Public Registry. 2. A fixed number of shareholders is not required by our law for the corporation to exist. Therefore, it can be wholly owned by a single person. 3. All the shares of stock of the corporation may be issued to the bearer. 4. The capital of the corporation need not to be paid at the time of incorporation. Thus, it is possible to have the corporation in existence without necessarily tying up funds prior to the time in which these are really needed. 5. Panamanian law does not require any correlation between the paid in capital and the value of the assests of the corporation. Thus, a corporation with a paid in capital of US$ 10 000.00 may have assets worth several million. 6. The stockholders, directors and officers of the corporaion need not to be Panamanians, may have any nationality and may be residents of any country. 7. The Board of Directors must be composed of at least three (3) members which is the minimum established by law, but any higher number of directors may be appointed. Juridical persons (companies) can act as directors as well. 8. Meetings of the Board of Directors of a Panamanian corporation may be held in any country. 9. The directors of the corporation may attend meetings of the Board personally or by proxy. 10. Meetings of stockholders of the corporation may be held in any country, if so authorized by the articles of incorporation or by-laws. 11. The stockholders of the corporation may attend meetings of shareholders personally or by proxy. 12. The corporation may engage in any lawful business, even if it is not similar to any of the objects of the corporation specified in the articles of incorporation. 13. The corporation may, according Panamanian law, undertake any kind of lawful business in any country other than Panama. 14. Corporations only have to pay incom tax in Panama for inccome derived from sources within the territory of the Republic of Panama. Income obtained from businesses effected outside the territory of Panama is not obtained in Panama and therefore is not taxable under Panamanian law. 15. A Panamanian corporation engaging in businesses in the Republic of Panama and also in other countries, will only pay income tax in Panama on the part of its income that is obtained from businesses transacted in Panama. 16. Panamanian legislation does not tax dividends received by corporations, if said dividends are paid out of income produced outside Panama. 17. Employees, officers or directors of a Panamanian corporation residing in foreign countries, do not have to pay income tax or any other tax in Panama on the compensation which they receive for their services. 18. The only tax established on corporations by the Republic of Panama, is the corporate tax or annual franchise tax, which is US$ 300.00 payable once a year. 19. Panama has not entered into any tax treaty with any country. XII. INCORPORATION PROCEEDING In order to incorporate a company under the laws of the Republic of Panama, the following data must be furnished: 1. Name of the corporation ( which may not be the same or similar to the name of any company already incorporated in Panama ). All names must end with the abreviation S.A. or Inc. or Corp. or the complete word "Corporation" or "Incorporated". S.A. means "Sociedad Anónima" ( anonymous corporation ). The name of the corpooration can not include any of the words "bank", "trust", "insurance" or any other word indicating such activities or any word similar as to cause confusion or which could be misunderstud and iterpreted as referring to any of said activities. It is recomendable to provide at least three (3) alternative names in order of preference, to find out their availability. 2. General objects. We have general standard objects and all lawful business are included, but specific objects can be inserted according to dthe clients' needs. 3. The authorized capital of the corporation and the number of shares of stock into which it is divided. The amount can be expressed in any currency, but it is usually expressed in US dollars. The standard capital is ten thousand US dollars ( US$ 10,000.00 ) divided into one hudred shares of US$ 100.00 each share, or ten thousand shares of US$ 1.00 each share or any other formula. A capital of non par value shares is also permitted. The standard non par value capital stock is 500 shares. 4. Whether the corporation may issue its share certificates to the beareror in nominative form, or in either way. The standard form allows both types. 5. The names and addresses of the directors of the corporation, which may not be less than three. Nominee directors can be provided by our office at an annual fee of US$ 100.00. Juridical persons ( companies ) can be appointed as directos. 6.
The names of the officers of the corporation. XIII. EXPENSES A registration fee or duty has to be paid at the Public Registry Office, upon the filing of the articles of incorporation. This registration fee is payable only once, upon registration, but also upon any increase of the authorized capital, and is based on the authorized capital of the corporation. The tarif of registration duties or fees payable on the basis of the authorized capital is as follows: AUTHORIZED CAPITAL REGISTRATION DUTY OR FEE US$
10,000.00 US$ 60.00 Shares
without par value will be assesed at US$ 20.00 each, only for the purposes
of fixing the registration duties or fees, payable to the Public Registry
Office. If only part of the shares are without par value, the registration
duties will be calculated over the sum of the shares with par value
and the shares without por value. In both cases, the registration duties
with respect to the non par value shares will not exceed US$ 1,000.00 These are subject to negotiation with the interested party, according to their needs and volume, if acting as an intermediary.
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