Key Considerations for Establishing a Corporation in Panama
Rebeca Muñoz, Founding Partner
Pacífica Legal
In 2023, 11,852 Corporations were registered at Panama’s Public Registry. This represents 11,852 new businesses incorporated in the country. Panama stands out in the incorporation of corporations due to various benefits: tax extraterritoriality, fast procedures, use of the US dollar, competitive prices, and the common use of Spanish and English. Additionally, an entity can be registered and obtain legal personality within as little as four business days.
Panama's Corporation Law dates back to 1927 and includes a series of requirements that, nearly 100 years after its enactment, provide versatility and structure to business formation, following a series of steps while allowing flexibility to adapt to the needs of the board of directors and shareholders.
This article highlights the fundamental requirements to consider when establishing a Corporation through Pacífica Legal's services:
Subscribers: The law defines subscribers as two or more individuals or entities who can be of any nationality and do not need to be domiciled in Panama. If they are individuals, they must be of legal age; if they are entities, they must issue a power of attorney to individuals to represent them. Both must sign a constitutive document known as the ‘Social Pact.’
Name: Known in the country as the ‘corporate name,’ it must be unique, in any language, and can consist of letters and/or numbers. The only requirement is that it must be different from any other entity already constituted in the country. This can be confirmed quickly and easily through the Public Registry of Panama's portal.
Purpose: This refers to the activity or set of activities to which the corporation will be dedicated. Panamanian legislation does not require detailed information but enough to categorize the type of activity (technological, information management, crypto-asset management, for example). Panama, by a Supreme Court ruling, allows Corporations to engage in any lawful business. Additional procedures will be required if the corporation's purpose focuses on regulated activities in the country, such as banking, securities and financial activities, trusts, insurance, among others.
Place of Incorporation: It establishes the jurisdiction and determines the applicable legislation. It is worth noting that in Panama, Article 39 of the National Constitution recognizes that it is permitted to form companies that are not contrary to morality or legal order, which can obtain recognition as legal persons. As of the writing of this article, Panama does not have a restriction on crypto or related services, allowing the creation of businesses based on or related to these types of platforms.
Minimum Share Capital: The law does not establish conditions or requirements for a minimum share capital. As a formality, all social pacts typically state a capital of USD 10,000.00.
Number of Directors and Board of Directors: Every corporation must have a minimum of three directors, appointed by the subscribers of the social pact, who will serve until replaced. Directors can be individuals or entities and must undergo due diligence by the firm to ensure they do not have personal or professional backgrounds that make their appointment unfeasible. After obtaining this personalized information for each entity, a Public Deed is prepared, notarized, and registered with the Public Registry to formally obtain legal personality. If subsequent changes are required, they will be made through minutes, also notarized, where the board of directors usually makes the decisions.
Other business opportunities in Panama:
Registration of a Foreign Corporation: In Panama, the registration and obtaining of legal personality of a foreign corporation is allowed, following the requirements established according to the entity's country of origin. Known as ‘redomiciliation,’ it refers to the change of jurisdiction and has been adopted by Panamanian legislation through Decree Law 5 and articles of the Commercial Code.
References:
Republic of Panama, Law 32 of 1927
Fábrega Polleri, Juan Pablo. "Treaty on Panamanian Corporation Law," 2023.
Public Registry of Panama. Number of Corporations Registered, Dissolved, Merged, and Bankruptcies, 2023. Retrieved from: https://www.registro-publico.gob.pa/estadisticas/estadistica23/sa.php