How to close a company in Panama?

Edgar Young, PhD.

Attorney-At-Law | Partner

Abstract: The present article outlines the process of dissolving and liquidating a Panamanian company. It provides a step-by-step overview of the legal requirements and procedures involved, from initiating dissolution with the Public Registry to notifying various government entities. It focuses on the key stages of corporate wind-down, including shareholder approvals, public notices, asset liquidation, and final reporting obligations.  

Intro. A client or board of directors may decide to close a company that was previously incorporated for various reasons. A common concern we receive is how to wind down a company in full compliance with Panamanian laws and regulation. The Panamanian Company Law (Law 32 of February 26, 1927), under Section IX, outlines the procedure for the dissolution and liquidation of Panamanian corporations. Nonetheless, the process extends beyond filing paperwork with the Public Registry. You'll also need to notify various government entities where your company is registered, including the General Directorate of Revenue (DGI), the Ministry of Commerce and Industries (MICI), the Social Security Fund (CSS), and your local municipality, among others. 

 To help you navigate this process, we've put together a step-by-step guide for dissolving and liquidating an active Panamanian corporation. Let's break it down: 

Before you Start...  

Make sure your company is up to date with its annual government payments to the DGI (“Tasa única”) and any other taxes due. Please note that a prerequisite to the dissolution procedure is that your company must be in good standing with respect to all payments to the tax authority. Then, you can commence the dissolution process with Panama’s Public Registry. 

Step 1: Dissolving Your Panamanian Corporation with the Public Registry 

1. Shareholder Authorization: Have the shareholders approve a shareholder’s resolution authorizing the dissolution of the company following all statutory formalities. 

2. Notarization and Registration: A certified copy of the dissolution approval minute must be notarized and subsequently registered with the Public Registry of Panama. 

3. Public Notice: Upon registration, a dissolution notice must be published in a newspaper of national circulation, thereby formalizing the dissolution and terminating the corporation's capacity to continue its chartered business activities. 

 Step 2: Liquidating Your Panamanian Corporation with the Public Registry 

The liquidation of the company can be performed before or after its dissolution.

Post-dissolution, the corporation retains limited legal capacity for a period not exceeding three years, solely for the purposes of:  

a) Defending its interests as a defendant in legal proceedings  

b) Transferring property  

c) Collecting outstanding debts  

d) Distributing capital 

Panamanian law establishes that the corporation is precluded from continuing its primary business operations during this period. However, the duration of the liquidation phase may be less than three years, contingent upon the specific circumstances of each case. 

Upon completion of the liquidation process: 

1. Shareholder Resolution: The shareholders must approve a resolution approving: i) The corporation's liquidation ii) Collection of all accounts receivable iii) Settlement of all outstanding debts iv) Distribution of remaining assets to shareholders. 

2. Legal Formalization: This resolution must be notarized and registered with the Public Registry of Panama. 

 Step 3: Notifying the General Directorate of Revenue (DGI) 

According to Article 717 of Panama's Fiscal Code, you need to file a final tax return and balance sheet within 30 days of ceasing operations. The tax authorities consider your cessation date to be when your dissolution agreement is registered with the Public Registry. 

Step 4: Notifying the Social Security Fund (CSS) 

 Article 88 of Law 51 (December 27, 2005) requires you to formally notify the CSS in writing about your temporary or permanent cessation of operations. Do this either before or within 30 calendar days after your effective cessation date. 

Step 5: Notifying the “Panama Emprende” System of the Ministry of Commerce and Industries (MICI) 

 If your corporation has an operating notice: 

1. Request its cancellation, specifying the date and reason. 

1. The user under whose registration the notice is held should manage this cancellation. 

1. If you're not sure who this user is, you'll need to request a user change through a formal letter. 

 Step 6: Notifying Your Local Municipality 

 Municipal Law 106 (October 8, 1973) and Municipal Agreement 40 (April 19, 2011) require you to notify your municipality about ceasing operations at least 15 days in advance. 

Additional Notes: 

• What happens if you don’t notify the company’s dissolution to an authority?  

  • Failing to properly notify these government entities could result in administrative fines. 

• How do you dissolve an offshore company in Panama? Is there any difference?  

  • In the case of offshore companies, steps 4-6 are not necessary, as the company does not have operations within the Republic of Panama.

 We hope this guide helps simplify the process of dissolving and liquidating your Panamanian corporation.  

If you have any inquiries, please contact us at info@pacifica.legal