THE PANAMANIAN CORPORATION

Panama is a commercial and trading center, and the Panamanian corporations have been frequently used since 1927 for types of activities. Panamanian corporations are used for the opening of bank accounts, as well as the registration of ownership of real estates, vessels, aircraft and diverse properties, either in Panama or abroad.

The laws concerning activities such as insurance and reinsurance, banking, trust, Private Foundations, the registration of vessels under a Panamanian flag, and the fact that U.S. currency circulates freely in the country, strengthen the Panamanian corporations regime. At the same time, mentioned elements contribute to the fulfillment of the goals and objectives traced by the investors.

Among some of the regulations governing corporations are the Executive Decree 204 of 16 July 1992, related to the designation of the Resident Agent, his resignation and replacement; Decree Law 5 of 2 July 1997, that allows a General or Special Power of Attorney be or not be recorded in the Public Registry; the option of inscribing the Financial Statements of the corporation in the Public Registry; that the Directors and/or shareholders attend meeting via phones, faxes, or any other electronic means of communications.

In order to organize a corporation in Panama, you need to do the following:

1. Suggest two or more names for the corporation (provided you wish to make the selection).
2. State any special objective of the corporation that you wish to include in the articles of incorporation.
3. Indicate the share capital and its composition.
4. Express the names and addresses of the Directors, in the event that you wish to appoint your own Directors. A minimum of three natural persons or one juridical is needed to act as members of the Board of Directors.
5. State the names and addresses of the persons designated as President, Secretary, and Treasurer if you prefer to appoint said officers.
6. Submit information about the beneficial owner of the corporation such as complete name, physical and mailing address, phone numbers, occupation, business activities, and purposes of the corporation.

LIMA Y ASOCIADOS can organize Panamanian corporations within five (5) working days. We maintain on-shelf corporations for your immediate use, and we can also provide mail forwarding, telephone, and fax services. Under a special agreement, banks, fiduciary companies, and lawyers can request the establishment of a group of corporations for future sales.

A. THE INCORPORATORS.

Any two persons, natural or juridical, can organize a corporation. However, the minutes of the Articles of Incorporation must be countersigned by a Panamanian lawyer, who, usually, provides the incorporators. Each incorporator agrees to subscribe one share. However, this right to acquire one share of the corporation in conveyed to the beneficiary of the corporation, once it is recorded in the Panamanian Public Registry.

B. THE NAME OF THE CORPORATION

Due to the large number of Panamanian corporations, it is preferable that you consider two or three alternate names for your corporation, so that their availability can be investigated. Once we investigate that the name is available, and upon your, request, the Public Registry can reserve it for thirty (30) days. A fee of US$30.00 is required by the Public Registry for pertinent reservation. Naturally, we suggest its immediate use. The name of your corporation cannot be similar or equal to any other name inscribed in the Public Registry.

When selecting the name of the corporation, it is advisable to keep in mind that law restricts the use of the following terms: bank, reinsurance, insurance, trust, fiduciary, and/or their derivatives. Any corporation using one of these terms must have a license granted in Panama to operate as such.

The Panamanian Law requires that all corporations have a word or an abbreviation in its name, indicating that it is a corporation. The word could be: Sociedad Anonima, Corporation or Incorporated, and the abbreviations could be: S.A., Corp., or Inc.
We suggest avoiding the use of the abbreviation "Co.", because said abbreviation in a name does not clearly identify your company as a corporation.

C. THE SHARECAPITAL

The capital of the corporation can be constituted by shares of par value, of no-par value, or a combination of both. There are no limitations on the amount of the share capital. This capital can be expressed in the legal currency of the Republic of Panama (the U.S. Dollar is legal currency in Panama) and also, in any other legal tender. However, the share capital stated in the Articles of Incorporation does not have to be paid when the corporation is registered in the Public Registry. If nominative shares are issued, they do not have to be fully paid. However, bearer shares must be fully paid before they are issued. The Directors of the corporation should receive a declaration to this effect before authorizing the issuance of the respective share capital. The issuance in part or of the entire authorized capital of the corporation is approved by the Board of Directors and the respective minutes are prepared accordingly. The names of the owners of the nominative shares are stated in the Share Register. The issuance of bearer shares is also registered; notwithstanding, this act is not subject to registration in the Public Registry Office.

D. THE PROTECTION OF MINORITY SHAREHOLDERS

The shareholders assembly is the supreme power of the corporation. However, the majority of the shareholders cannot deprive the minority shareholders of their acquired rights, or pass a resolution against the Law, the Articles of Incorporation, and/or the By-Laws of the corporation. The minority shareholders affected by a resolution adopted by the majority, against the Law, the Articles of Incorporation, and/or the By-Laws may request its annulment before a competent court, within the term of thirty (30) days. The respective court may suspend the execution of the resolution until the suit is settled. This suspension is not granted if the shareholder selects ordinary proceedings at the time of filing the suit.

E. THE DIRECTORSHIP

According to Panamanian Law, corporations require three naturals or one juridical person in order to form the Board of Directors. The Directors don't need to be shareholders, and there are no established formalities for the acceptance of its mandates. A Director continues as such until his/her successor has been elected. Every change in the composition of the Board of Directors should be inscribed in the Public Registry. The Directors usually manage the administration of the company. However, they can elect managers and/or other officers, and their faculties can be restricted in the Articles of Incorporation. The Board of Directors can sell, lease, exchange or dispose of all or part of the properties of the corporation in order to guarantee debts to third parties, without the consent of a shareholders assembly. This is possible if said faculties are started in the Articles of Incorporation.

F. THE OFFICERS

We recommend that the corporation be composed of three officers: a President, a Secretary and a Treasurer. Usually, they are members of the Board of Directors at the same time; however, one person can occupy more that one office. The corporation can have other officers in addition to the president, the secretary, and the treasurer; e.g., a Vice-president, an assistant secretary, etc. Regarding the resignation of an officer, the rule applied to the directors is also in force.

G. THE RESIDENT AGENT.

All Panamanians corporations must have a resident agent who, according to the Panamanian law, must be a lawyer or a low firm. He/she must know the identity of his/her client (Decree Law 468 o 19 September 1994. The name of the resident agent appears in the public deed of constitution and he/she is the liaison between the Panamanian Government and the corporation. Normally, the resident agent appears before a notary Public to protocolize the articles of incorporation and its amendments, and is empowered to obtain the inscription of the Public Deed in those cases that are necessary The client maintains communication with the corporation through the resident agent, who will advise him/her of the corresponding payment of the annual franchise tax and, if applicable, the payment of the directors fee. Apart from handling the legal matters that may arise for the corporation, the resident agent can provide additional services when requested, such as postal box, fax, mail forwarding, as well as administrative services.

H. TAXATION

If the Panamanian corporation does not conduct businesses within the Panamanian territory, neither the corporation nor the shareholders have to pay income tax in Panama, with the exception of the annual franchise tax which was established in 1977 as a vehicle to maintain the corporation in good standing.

The registration fee is paid according to the authorized capital of the corporation. It is prepaid by the resident agent when entering the public deed of constitution of the corporation in the public registry office.

For the purpose of payment of the registration fee, no par value shares are deemed to have a value of US$20,00 each.
If the corporation increases its share capital, the registration right is paid according to the increase.

I. THE REGISTRATION FEE

The registration fee is paid according to the authorized capital on the corporation. It is prepaid by the Resident Agent when entering the Public Deed of Constitution of the corporation at the Public Registry Office. Examples of the registration fee are as follows:

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