New Changes for Panamanian Legal Entities

Law 52 of October 27, 2016

New Changes for Panamanian Legal Entities

Recently the Panamanian Government approved Law 52 of October 27, 2016, which will enter into force on January 1, 2017. Law 52 establishes mandatory rules for corporations and private interest foundations in three principal aspects:

  1. Offshore legal entities (corporations and private interest foundations) are required to maintain accounting records along with its supporting documentation;
  2. The suspension of corporate rights for legal entities who do comply with certain obligations; and
  3. Modifications to Law 47 of August 6, 2013, which established the restriction on the requirement of immobilization of bearer shares.

 

Obligation to Maintain Accounting Records for Offshore Legal Entities

 Law 52 provides that offshore legal entities (corporations and private interest foundations that do not operate within Panama) must keep accounting records together with its supporting documentation.

An entity’s accounting records and their supporting documentation may be kept in the offices of the entity’s resident agent located in Panama, or may be maintained outside of Panamanian territory.  If the records and documentation will be maintained outside of Panama, the legal entity must provide to the resident agent, in writing, the address where the records and documentation is or will be held, and the person in charge of preserving this information.

The accounting records and its supporting documentation must be kept for 5 years, counted from the last day of the calendar year in which the transactions contemplated in such registries were done, or counted from the last day of the year during which the legal entity ceased its operations.

The accounting records and its supporting documentation will be kept confidential, but must be available if required by a Panamanian government authority (the Tax Office of the Ministry of Economy and Finance), in which case the entity must present the requested documents within the following 15 days. If the documentation is not presented within this time-frame, the resident agent is obliged to present and register with the Public Registry its resignation as resident agent of the entity, within 10 days following of the aforementioned date. At such time, the authorities will levy fines and penalties against the legal entity.


 

Suspension of Corporate Rights for Legal Entities 

 Law 52 establishes as a penalty the suspension of corporate rights for corporations and private interest foundations, in the following cases:

  • If the Legal Entity does not have a resident agent for ninety (90) consecutive days;
  • Non-payment of one annual corporate tax;
  • Late payment of the annual corporate tax for three (3) consecutive years; or
  • Delay in the payment of fines and penalties imposed by order of a government authority.

If a legal entity has had its corporate rights suspended, it will not be able to register any documents with the Public Registry, or to receive any certifications issued by the Public Registry.

The law provides for a maximum of two (2) years during which the legal entity may come into compliance with the above and re-activate its corporate rights, otherwise the entity will automatically be permanently dissolved.


 

 Modifications to Law 47 Concerning the  

Restriction on Alienation or other Transfer of Bearer Shares 

Law 52 also modifies a provision of Law 47 of August 6, 2013, which had established the requirement of immobilization of bearer shares, requiring the holder of bearer share certificates to give custody of such certificates to an authorized custodian, otherwise economic and political rights in relation to such shares shall be terminated.


 

It is important to note that these new requirements will not change the structural nature or the operations of the legal entity; such entities will keep their same essence and nature after the law enters into force.

Please contact us if you require any additional information. If you need assistance concerning these required accounting services, we can provide them through one of our subsidiaries. Please send us any question to the following address galacorporate@gala.com.pa