PANAMANIAN PRIVATE FOUNDATIONS.

LEGAL CHARACTERISTICS

The Private Foundation is an institution having its own juridical personality and a patrimony composed of the assets transferred by the Founder or a third party, for nonprofit oriented purposes in favor of the Founder, its family, and third parties.

The usual objectives to be pursued by the Private Foundation are of educational, social, or scientific nature. Thus, the objective of a Foundation may be to allocate the income derived from the administration of a real asset to the education and maintenance of the children, spouse, and other relatives of the Founder. Likewise, the son wishing to ensure a dignified existence for his progenitors, may choose to establish a Private Foundation.

Although the Panamanian Private Foundation shall not be profit oriented, it may engage in commercial activities in a non-habitual manner or exercise the rights deriving from titles representing the capital of business companies held as part of a Foundation’s assets, provided that the proceeds from such activities are dedicated exclusively towards the Foundation’s objectives.

The assets of the Foundation constitute an estate separate from the Founder’s assets for all legal purposes and, therefore, may not be subject to any precautionary measures in virtue of actions prosecuted for personal obligations of the Founder or of the beneficiaries of the Foundation.

The Foundation’s patrimony shall only respond for obligations incurred or damages caused by virtue of actions taken fulfilling the objectives of the Foundation, or for legitimate rights of the beneficiaries of the Foundation.

For the purpose of ensuring the fulfillment of the wishes of the Founder, our law provides that the Panama Foundation is not applicable to the inheritance laws of the domicile of the Founder or of the beneficiaries.

Generally, the Foundations are irrevocable, nevertheless, the Foundation Charter may provide otherwise, but, when a Foundation has been created to be effective after the death of the Founder, the Founder shall have the right to revoke it at all times.

REQUIREMENTS TO CONSTITUTE A FOUNDATION:

In order to constitute a Private Foundation in Panama, we need the following information:

1. One or more names to check its availability (provided that you wish to select one).

2. The specific objectives to be included in the Foundation Charter.

3. The initial patrimony of the Foundation.

4. If the Foundation will be of revocable or irrevocable nature.

5. The names and addresses of the members of the Foundation Council or the instructions requesting us to integrate it.

6. The domicile of the Foundation, if you decide to establish a domicile other than Panama.

7. The duration of the Foundation.

8. The reservation of the right to modify the Foundation Charter.

9. Any other lawful clauses which you may wish to include in the Foundation Charter.

FORMATION AND EXISTENCE.

One or more natural or juridical persons, of any nationality or domicile, acting on their own name or on behalf of third parties, may constitute a Private Foundation permanently.

The Private Foundation is constituted by a document named Foundation Charter, which must be signed by the person establishing same, countersigned by a Panamanian lawyer, and recorded in the Panamanian Public Registry.

The Panamanian Private Foundation obtains its juridical personality upon the registration of the Foundation Charter in the Panamanian Public Registry.

NAME OF THE FOUNDATION

The name of the Foundation may be stated in any language with characters of the Latin alphabet and shall include the word FOUNDATION or its translation into de subject language. To avoid confusion, said name shall no be identical or similar to that of any other Foundation existing in the Republic of Panama.

PATRIMONY OF THE FOUNDATION

The patrimony of the Foundation may be constituted by assets of any nature, present or future, and the same constitutes an estate separate from the Founder’s personal assets.

In Panama, the initial patrimony may no be less that US$10,000,00, amount which may be expressed in any currency of legal tender. Said patrimony is the only patrimony to be stated in the Foundation Charter; therefore, at the time of constituting the Foundation, it is only necessary to state that its initial patrimony is of US$10,000,00 and thus, paying the minimum registration fees. Furthermore, the initial patrimony does not need to be furnished at the time of the registration of the Foundation.

The Foundation’s patrimony may include real estates and these may be registered under the name of a corporation, which shares shall be owned by the Foundation.

BODIES OF THE FOUNDATION

A. THE FOUNDATION COUNCIL:

Shall be responsible for carrying out the objectives of the Foundation and for administering the assets thereof, following the directions stated by the Founder.

It shall be composed of natural persons, of any nationality and domicile, in which case, at least three persons shall be required, or of one or more juridical persons or of both categories of persons.

The faculties or responsibilities of the Foundation Council shall be established in the Foundation Charter or in its Regulations and the Founder may subordinate the exercise of such powers to a supervisory entity. Also, the faculties of the Foundation Council can be delegated to a third person, according to he powers stated in the Foundation Charter or the Regulations.

Unless the Foundation Charter or its regulation provide otherwise, the Foundation Council must render account of its administration to the beneficiaries and, where applicable, to the supervisory entity, within the time specified in the Foundation Charter or in its Regulations. In the absence of such provision, rendering of accounts must be done annually.

B. THE SUPERVISORY ENTITY:

The Founder, in the Foundation Charter or in its regulations may subordinate the exercise of the powers of the Foundation Council, to the previous approval of a supervisory entity, commonly knows as ¨Protector¨, which may be constituted by natural or juridical persons, such as auditors or other alike.

DOMICILE AND CHANGE OF JURISDICTION

The Foundation may have its domicile in Panama or in any other country.

Foundations constituted in accordance with the Panamanian law, as well as the assets constituting their patrimony may become subject to he laws and jurisdiction of another country, provided that such possibility is stated in the Foundation Charter or in its Regulations. Likewise, the Foundation constituted pursuant to a foreign law, may become subject to the Panamanian Law. Notwithstanding, said transfer does not imply the extinction of the proceeding previously brought by the beneficiary against the Foundation or those brought by the Foundation.

RESIDENT AGENT

All Foundations have a resident agent in Panama, who, pursuant to the law, is a lawyer or a law firm, chose name must be stated in the Foundation Charter, the resident agent is the liaison between the Panamanian government and the Foundation.

THE FOUNDATIONS REGULATIONS

Normally, the beneficiaries of the Foundation are designated in a private document known as “the Regulations.” Their terms and conditions in which the beneficiaries shall receive the results or proceeds of the patrimony of the Foundation are also stated in this document.

Such regulations is a separate private document from the Foundation Charter which may be executed by the Founder or by the Foundation Council, provided it has been stated in this manner by the Founder.

SIMILITIES AND DIFFERENCES BETWEEN THE TRUST AND THE PRIVATE FOUNDATION.

1. We do not see the pictures of the partners or shareholders in the Trust and in the Private Foundation, but we do see that of the fideicommissaires or beneficiaries, who are the persons receiving the benefit of the Trust or the Foundation.

2. The fact that the Founder of a Trust, of a Foundation, or a third party has donated assets to the integration of the funds for the Trust or the Foundation’s patrimony, does not necessarily mean that they acquire any rights over said donations. Notwithstanding, both the Trust Law and Private Foundation Law permit to include the Founder of a Trust or the Founder of a Foundation as beneficiaries.

3. The Trust instrument must only be registered in the Panamanian Public Registry in the assumption that it is constituted over real property located in the Republic of Panama. The Foundation Charter must be always registered in the Panamanian Public Registry.

4. The Trust does not have its own juridical personality, while the Private Foundation does.

5. In the Trust, the grantor transfers his assets to a third party (Trustee), who administers them pursuant to the instructions given by the grantor, while in the Private Foundations, these assets are transferred in favor of the Foundation, thus constituting a separate patrimony from the Founder’s personal assets. However, the Founder may participate in the administration of these assets, since it is permitted for him to be a part of the Foundation Council.

 

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