LAW No. 25, of 12th June, 1995 ON PRIVATE
FOUNDATIONS AND
EXECUTIVE DECREE No. 417 (of 8 August, 1995)
"Whereby the Private Foundations Section
is created within the General Directorate of the Public Registry,
and regulations are established for the registration of the
constitution, modification and extinction of said foundations."
A Private Foundation may be created in
accordance with the formalities prescribed in this law by one or
more natural or juridical persons, either personally or through
third parties. For this purpose an endowment shall be established,
to be used exclusively towards the objectives or purposes
expressly provided for in the Foundation Charter. The initial
endowment may be increased by the creator of the foundation, who
shall hereinafter be known as the founder, or by any other person.
ARTICLE 2.
Private Foundations shall be governed by their
Foundation Charter and its Regulations as well as by the
provisions of this law and any other applicable legal or
regulatory provisions. The provisions of Title II, Book I of the
Civil Code shall not apply to these foundations.
ARTICLE 3.
Private Foundations shall not be profit
oriented. They may nevertheless engage in commercial activities
on a non-habitual basis or exercise rights deriving from titles
representing the capital of business companies held as part of a
foundation's assets, provided that the economic result or
proceeds from such activities are used exclusively towards the
foundation's objectives.
ARTICLE 4.
Private Foundations may be constituted to
become effective from the time of their creation or upon the
death of their founder, following either of the following methods:
By means of a private document signed
by the founder, whose signature shall be authenticated by
a Notary Public at the place of constitution.
Directly before a Notary Public at the
place of constitution.
Whichever may be the constitution method, the
formalities prescribed in this law for the creation of
foundations shall be complied with.
In the event a foundation is created, be this
by public or private document, in order to take effect after the
death of the founder, the formalities prescribed for making a
will shall not be required therefore.
ARTICLE 5.
A Foundation Charter shall contain:
1.The name of the foundation, in any
language using the Latin alphabet, which name shall not
be the same or similar to that of a pre-existing
foundation of the Republic of Panama so as not to lend
itself to confusion. The name shall include the word
"foundation" in order to distinguish it from
natural persons or from different types of juridical
persons.
2.The foundation's initial patrimony,
expressed in any currency being legal tender, which in no
case shall be less than a sum equivalent to $10,000.00.
3.A complete and clear designation of
the member or members of the Foundation Council, to which
the founder may belong, including their addresses.
4.The foundation's domicile.
5.The name and address of the
foundation's resident agent in the Republic of Panama,
who shall be a lawyer or a law firm, who shall
countersign the Foundation Charter prior to its
registration at the Public Registry.
6.The purposes of the foundation;
7.The manner in which the
beneficiaries of the foundation, who may include the
founder, are designated.
8.The reservation of the right to
modify the Foundation Charter where considered
expedient.
9.The duration of the foundation.
10.The use to be made of the
foundation's assets and the manner in which its estate is
to be liquidated in the event of dissolution.
11. Any other lawful clauses deemed
expedient by the founder.
ARTICLE 6.
The Foundation Charter, as well as any
amendment thereto, shall be written in any language that uses the
Latin alphabet and shall comply with the regulations relating to
the registration of acts and titles at the Public Registry, for
which purpose it must first be protocolised at a Notary Public's
office in the Republic of Panama. If a Foundation Charter or its
amendments are not written in Spanish, same shall be protocolised
together with its Spanish translation made by a certified public
translator of the Republic of Panama.
ARTICLE 7.
Any amendments to the Foundation Charter,
where they are permitted, shall be made and signed in accordance
with its provisions. The respective amendment agreement,
resolution or modification document shall include the date on
which it was made and the clearly identifiable name(s) of the
person(s) signing it and his/her (their) signature(s) which shall
be authenticated by a Notary Public of the place of signature.
ARTICLE 8.
Every Private Foundation shall pay a
registration fee and a single annual registration tax equivalent
to those established for corporations in Articles 318 and 318A of
the Fiscal Code.
The procedure and form of payment, surcharge
for late payment, consequences of non-payment and all other
provisions complementary to the aforementioned legal provisions
shall apply to Private Foundations.
ARTICLE 9.
The registration of the Foundation Charter of
a Private Foundation at the Public Registry shall confer upon it
juridical personality without the need for any other legal or
administrative authorization. Registration at the Public Registry
shall in addition constitute a means of publicity with regard to
third parties.
Consequently, a foundation may acquire and own
assets of all kinds, incur obligations and be a party to
administrative and judicial processes of all kinds, in accordance
with any applicable provisions.
ARTICLE 10.
Once a foundation has acquired juridical
personality, the founder or third parties who have undertaken to
contribute assets to the foundation, of their own accord or at
the request of any person having an interest in the foundation,
shall formalize the transfer of the assets they pledged. When the
foundation has been constituted to take effect upon the death of
the founder, it shall be deemed to have existed prior to the
founder's death with respect to the donations which he may have
made to the foundation.
ARTICLE 11.
For all legal purposes, the assets of a
foundation shall constitute an estate separate from the founder's
personal assets. Therefore, they may not be seized, attached, or
be subject to any lawsuits or precautionary seizures, save for
obligations incurred or damages caused by virtue of the
fulfillment of the purposes and objectives of the foundation or
on the basis of legitimate rights of the foundation's
beneficiaries. In no case shall such assets be used to respond
for the personal obligations of the founder or of the
beneficiaries.
ARTICLE 12.
Foundations shall be irrevocable save in the
following cases:
where the Foundation Charter has not
been registered at the Public Registry;
where the Foundation Charter expressly
provides otherwise;
For any of the causes of revocation of
donations.
Transfers made to foundations shall be
irrevocable on the part of the transferor, except if expressly
otherwise provided in the transfer deed.
ARTICLE 13.
In addition to the provisions of the foregoing
article, whenever a foundation has been created so as to take
effect upon the founder's death, he shall have the exclusive and
unlimited right to revoke it.
The founder's heirs shall have no right to
revoke the creation of or transfers to a foundation, even in the
event that such foundation has not been registered at the Public
Registry prior to the founder's death.
ARTICLE 14.
The existence of any legal provisions
concerning inheritance matters at the founder's or the
beneficiaries' domicile shall not be opposable to the foundation,
nor shall such provisions affect the validity of the foundation
or prevent the attainment of its purposes in the manner provided
in the Foundation Charter or its regulations
.
ARTICLE 15.
The creditors of the founder or of a third
party shall have the right to contest the contribution or
transfer of assets to a foundation where such transfer
constitutes an act to defraud creditors. The rights and right to
sue of said creditors shall lapse three (3) years from the date
of the contribution or transfer of assets to the foundation.
ARTICLE 16.
The assets of a foundation may originate from
any lawful business and may consist of property of any nature,
present or future. Other sums of money or property may also be
periodically incorporated into the assets by the founder or by
third parties. The transfer of property to the foundation's
assets may be effected by public or private document.
Nevertheless, in the case of immovable property, the transfer
shall comply with the rules relating thereto.
ARTICLE 17.
The foundation shall have a Foundation Council
whose powers or responsibilities shall be established in the
Foundation Charter or its regulations. Unless the Council is a
juridical person, the number of members in the Foundation Council
shall be not less than three (3).
ARTICLE 18.
The Foundation Council shall be entrusted with
the fulfillment the Foundation's aims or purposes. Unless
otherwise provided in the Foundation Charter or its regulations,
the Foundation Council shall have the following general
obligations and duties:
To manage the assets of the Foundation
in accordance with the Foundation Charter or its
regulations.
2. To carry out those acts, contracts
or business as may be expedient or necessary to fulfill
the purpose of the foundation and to include in such
contracts, agreements and other instruments or
obligations, such clauses and conditions as are necessary
and expedient, being consistent with the foundation's
purposes and not contrary to law, morality, good manners
or public order.
To inform the beneficiaries of the
foundation about its economic situation as provided by
the Foundation Charter or its regulations.
To hand over to the beneficiaries of the
foundation the assets or resources settled in their favor
in the Foundation Charter or its regulations.
To carry out those acts or contracts which
the foundation, according to this law and other
applicable legal or regulatory provisions, may be
permitted to carry out.
ARTICLE 19.
The Foundation Charter or its regulations may
provide that the members of the Foundation Council may only
exercise their powers after obtaining prior authorization from a
Protector, a committee or any other supervisory body appointed by
the founder or by the majority of the founders. The members of
the Foundation Council shall not be held liable for any loss or
deterioration of the foundation's assets, nor for any damages
caused where the aforesaid authorization had been duly obtained.
ARTICLE 20
Unless otherwise provided in the Foundation
Charter or its regulations, the Foundation Council shall render
accounts of its administration to the beneficiaries and, where
applicable, to the supervisory body. If the Foundation Charter or
its regulations contain no provision in this regard, the
rendering of accounts must be done annually. If no objections to
the account rendered are raised within the term established in
the Foundation Charter or its regulations, or if such term were
not specified, the accounts rendered shall be deemed to have been
approved ninety (90) days from the date these were received, for
which purpose a record of this term shall be entered in the
accounts. Upon either the end of said term or approval of the
accounts, the members of the Foundation Council shall be exempt
from liability for their administration, unless they had failed
to act with the diligence of a bonus paterfamilias. Such approval
shall not exempt them vis-…-vis the beneficiaries or third
parties having an interest in the foundation with regard to any
damages caused by gross negligence or fraud in the administration
of the foundation.
ARTICLE 21.
The founder may reserve in the Foundation
Charter, for himself or for other persons, the right to remove
the members of the Foundation Council as well as to appoint or
add new members.
ARTICLE 22.
Where the Foundation Charter and the
regulations do not contain provisions regarding the right to
remove and the causes for removal of the members of the
Foundation Council, said members may be judicially removed, by
means of summary proceedings, for the following causes:
Whenever their interests are incompatible
with the interests of the beneficiaries or of the founder.
If they managed the foundation's
assets without the due diligence of a bonus pater
familias.
If they were convicted of any offense
against private property or public faith. In such a case,
whilst criminal proceedings are taking place, the
prosecuted member may be temporarily suspended from
office.
Due to the inability or impossibility
of fulfilling the objectives of the foundation, from the
time such causes arise.
Due to insolvency, bankruptcy or creditors
meeting proceedings.
ARTICLE 23.
The judicial removal of the members of the
Foundation Council may be requested by the founder and the
beneficiary or beneficiaries. If the beneficiaries were disabled
or minors, they may be represented by whoever exercises patriae
potestas or legal guardianship over them, as the case may be.
The judgment decreeing the removal shall
appoint new members in replacement of the former members who
shall be persons with sufficient capability, qualifications and
sound moral standing to manage the foundation's assets in
accordance with the purposes established by the founder.
ARTICLE 24.
The Foundation Charter or its regulations may
provide for the creation of supervisory bodies that may be
constituted by natural or juridical persons, such as auditors,
Foundation Protectors or the like.
The roles of such supervisory bodies shall be
established in the Foundation Charter or its Regulations and may
include, inter alia, the following:
To ensure fulfillment of the foundation's
purposes by the Foundation Council and to protect the
rights and interest of the beneficiaries.
To demand the rendering of account by the
Foundation Council.
To modify the purposes and objectives of
the foundation where their fulfillment becomes impossible
or burdensome.
To appoint new members to the
Foundation Council because of a temporary or permanent
absence or the expiration of the period for which they
were appointed.
To appoint new members to the
Foundation Council in the event of the temporary or
accidental absence of any of them.
To increase the number of members of
the Foundation Council.
To endorse actions taken by the Foundation
Council pursuant to the Foundation Charter or its
regulations.
To safeguard the foundation's assets and
to ensure that said assets are used for the objectives or
purposes stated in the Foundation Charter.
To exclude beneficiaries from the
foundation and to add other beneficiaries in accordance
with the provisions of the Foundation Charter or its
Regulations.
ARTICLE 25.
A foundation shall be dissolved upon:
1. The advent of the date on which such
foundation should terminate in accordance with its Foundation
Charter.
2. The achievement of the purposes for which
it was created or because their fulfillment becomes impossible.
3. Its insolvency, cessation of payments or
upon adjudication of bankruptcy.
4. The loss or total extinction of the
foundation's assets.
5. Its revocation.
6. Any other cause established in the
Foundation Charter or in this law.
ARTICLE 26.
Any beneficiary of a foundation may object to
those acts of the foundation that violate the rights conferred
upon him or her by the foundation, denouncing said circumstance
to the Protector or to other supervisory bodies, if any, or,
lacking same, by directly instituting the corresponding judicial
action before the appropriate court in the foundation's domicile.
ARTICLE 27.
The acts of creation, modification and
extinction of a foundation shall, as well as acts of transfer,
transmittal or encumbrance of a foundation's assets and the
income arising there from or any other act in connection therewith,
shall be exempt from all taxes, contributions, rates, liens or
imposts of any kind or description, provided that said assets
consist of:
1. Assets located abroad;
2. Money deposited by natural or juridical
persons whose income does not arise from a source in Panama or is
not taxable in Panama for any reason;
3. Shares or securities of any kind, issued by
companies whose income does not arise from a source in Panama, or
where their income is not taxable for any reason even though such
shares
or securities be deposited in the Republic of
Panama.
The transfer of immovable property, titles,
certificates of deposit, securities, monies or shares made in
pursuit of the objectives or purposes of a foundation or due to
the extinction of a foundation, in favor of the founder's
relatives within the first degree of consanguinity or to the
founder's spouse, shall also be free from any taxes.
ARTICLE 28.
Foundations constituted in accordance with a
foreign law may submit to the provisions of this law.
ARTICLE 29.
The foundations referred to in the preceding
article that elect to become subject to the provisions of this
law shall submit a Certificate of Continuation issued by the
pertinent body according to their internal organization which
shall contain:
1. The name of the foundation and the date of
its constitution.
2. The data relating to its recording or
deposit at the registry of its country of origin.
3. The express declaration of its wish to
continue its legal existence as a Panamanian foundation.
4. The requirements set forth in Article 5 of
this law for the constitution of Private Foundations.
ARTICLE 30.
The certification containing the Resolution of
Continuation and the other requirements mentioned in the
preceding article shall have the following documents attached to
it:
1. A copy of the original Act of Constitution
of the foundation desiring to continue in Panama, together with
any subsequent amendments;
2. Power of attorney in favor of a Panamanian
lawyer to carry out the formalities required to carry out the
continuation of the foundation in Panama.
The Certificate of Continuation, together with
the attached documents referred to in this law, shall be duly
protocolised and registered at the Public Registry in order for
the foundation to continue its legal existence as a Private
Foundation of the Republic of Panama.
ARTICLE 31
.
In the cases envisaged in Article 28, the
responsibilities, duties and rights of the foundation acquired
prior to the change of domicile or governing law shall continue
in effect, as will any lawsuits that may have been brought
against or by the foundation, without prejudice to such rights
and obligations due to the change authorized by the
aforementioned legal provisions.
ARTICLE 32.
Foundations constituted in accordance with
this law as well as the assets that constitute their patrimony,
may be transferred or become subject to the laws and jurisdiction
of another country as may be provided in the Foundation Charter
or its Regulations.
ARTICLE 33.
Registrations relating to Private Foundations
shall be made at the Public Registry in a special section to be
known as the "Private Foundations Section." The
Executive Branch, acting through the Ministry of Government and
Justice, shall issue the regulations applicable to said section.
ARTICLE 34.
To avoid the undue use of Private Foundations,
all the provisions of Executive Decree No. 468 of 1994 and any
other legal provisions in force aimed at combating money
laundering arising from drug trafficking shall be applied to
their operation.
ARTICLE 35.
Members of the Foundation Council and of the
supervisory bodies, if any, as well as public servants or private
sector employees who have knowledge of the activities,
transactions or operations of foundations shall maintain secrecy
and confidentiality regarding these at all times. Breach of this
obligation shall be punishable by six (6) months imprisonment and
a B/.50,000.00 fine, without prejudice to the corresponding civil
liability.
The provisions of this Article are applicable
without prejudice to the information that must be disclosed to
official authorities and the inspections the latter must carry
out in the manner established by the law.
ARTICLE 36
Any dispute for which no special process is
specified in this law shall be resolved by means of a summary
process.
The Foundation Charter or its regulations may
establish that any dispute arising with regard to the foundation
shall be resolved by arbiters or arbitrators, as well as the
procedure to be followed. If no such procedure has been
established, the rules of the Judicial Code on this matter shall
apply.
ARTICLE 37.
This Act shall enter into effect upon its
publication.
