Paid-in Capital Vs. Authorized Capital.


by: Maria Cristina Lima

Having both a Panamanian Foundation, and a Corporation, have very different characteristics i.e.:

    1. While the paid-in capital is defined as the amount paid for the shares of a corporation, the authorized capital is the minimum value that can be given to the shares of the company and that is authorized by the Public deed of Constitution of the company itself.
    2. While the paid-in capital corresponds to the funds paid by the shareholders (owners of the corporation) as evidence of their property, the authorized capital can be fully paid after the constitution of the corporation.(And not before it)
    3. The paid in capital is also known as established capital or as subscribed capital whilst the authorized capital is also known as nominal capital. The Panamanian Corporations Law uses the term “Social Capital”, “Authorized Capital” and “Capital” indistinctevly.
    4. The paid-in capital can as well be greater or smaller than the authorized capital, whereas the authorized capital previously is established in the Public deed of Constitution and can only be changed by an amendment of the Public deed of Constitution.
    5. The paid-in capital is the one that the shareholders indeed have paid and has entered into the corporation. A corporation does not have to cover the total sum of its authorized capital.
    6. It is necessary to establish the authorized capital in the Public deed of Constitution but not the paid-in capital.
    7. In Panama, the Registry fees are paid according to the amount of the authorized capital and not the paid-in capital.

SOME DETAILS OF THE PANAMANIAN CORPORATIONS WITH RESPECT TO THE CAPITAL ARE:

    The Panamanian law does not require for the authorized capital to be paid, subscribed or paid out. It also does not require a minimum or maximum amount for the authorized capital or the paid-in capital, nor a period in which they must be paid.

    The paid-in capital and the authorized capital should both be differenced from the operating capital which consists on the present assets (like cash, inventory and accounts receivable) minus the present liabilities.

    The authorized capital of a Panamanian corporation can be constituted of the following way:

    1. Stocks with nominal value.

    2. Stocks without nominal value.

    Thess can be issued to the name of the stockholder (nominative stocks) or to the "bearer".


    It is not necessary that the amount of the authorized capital be deposited in a bank at the time of issuing the registered stocks. However for the stocks that are issued in bearer form, it is understood that this stocks have been paid-in, this means that at the moment of the issuance of these stocks there has to be an amount paid for them.

    This is established by article No. 28 of the Panamanian Corporations Law:
    “Stocks in bearer form will not be issued if they have not been fully paid and released”


    The responsibility of the stock holders is limited to the sum of the capital that they have to contributed.
    The sums paid in excess to the authorized capital constitute the “paid-in capital in excess” and although this is part of the work capital, it is not considered as part of the authorized capital.


    We can find a clear difference between “patrimony” and “share capital” in a December 12, 2003, sentence dictated by the court that reads: “… the patrimony of a corporation is not the share capital, it is constituted by all the present and future assets that the corporation owns”

     

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