The Panamanian Corporation
The Corporation limited by shares is the most common corporate form in Panama. Corporations in Panama are governed under the Law No. 32 of 1927 and the Commercial Code (Decree-Law No. 5 of 1997, Article 5).
A Panamanian Corporation is formed by two persons called Subscribers or Nominees (persons who act on behalf of absent foreigners). The Subscribers or Nominees execute legal documents termed the Articles of Incorporation. Those documents are filed with the Panama Public Registry office, and the Corporation pays a Capital tax (minimum USD $60.20 on the usual Capital of USD $10,000). There is an annual registration fee of USD $300. All commercial and industrial businesses must have a Notice of Operations or an exemption in order to engage in business. A Notice of Operations cost is 2% of a company’s net worth and up to a maximum of USD $60,000. Companies operating in any of the Free Zones are subject to an annual license tax of 1% of net worth and up to a maximum of USD $50,000.
After the Corporation is actually formed, Panama laws only require one shareholder. Shares can be of various classes, can have par value or not, may be officially registered, or can be discreet bearer shares. There is no minimum Capital, and no paying-up rules, except that no-par-value and bearer shares are to be fully paid when issued. Strict regulations may apply to bearer shares. The registered agent must keep the bearer share certificate in safe custody at all times and must notify the Registrar about such shares.
The corporation must have a resident Registered Agent (Panamanian lawyer).
There must be at least three Directors’ names in the Articles of Incorporation. Any Director changes must also be filed with the Public Registry. Unless the Articles are changed or the Corporation merges or dissolves there are no other filing requirements.
If you already have a corporation in another country, it can do business in Panama by filing the following documents at the Public Registry Office:
1. A notarized Spanish translation of the Articles of Incorporation;
2. Board of Directors minutes authorizing the Panamanian registration;
3. Copies of recent financial statements;
4. A certificate from a Panamanian Consul confirming that the company is organized according to the laws of its place of incorporation;
5. Notification of the transfer of capital to the Panamanian operation.
How to Form a Corporation in Panama
Panama law requires that two people, acting as organizers and subscribers, appear before a Notary to create a corporation. However, you do not need to travel to Panama to create a corporation. Foreigners often hire a Panamanian lawyer to form the corporation. Requirements for creating a Panamanian company:
- Company Name: You will need to choose a company name. The name can be in any language with the only requirement being that it end with a corporate ending, to differentiate it. These include Anonymous Society (S.A.), Corp., Incorporated, Corporation, Inc. Limited, and Ltd.
- Articles of Incorporation: The corporation’s purpose must be stated and submitted to the proper authorities. The description of the corporation’s purpose should be fairly accurate but can be very broad. If it is intended that the company be used for multiple activities, this too, needs to be indicated.
- Authorized Capital: No minimum capital is required to form a Panamanian corporation. However, taxes and fees are factored against the company’s capital. When the capital is up to US $10,000, the registration fee is $250. This fee is the annual minimum tax during the company’s lifetime.
- Shares: Shares can be issued in any number of forms, with the most common being a Bearer share. This information is public record and can be found in the Articles of Incorporation.
- Directors: The laws in Panama require a minimum of three directors for each corporation and does not specify a maximum number of directors. There are no requirements for who can be a director, and when the owners of the corporation wish to remain anonymous, it is possible to have fictional persons (corporations) act as directors. Lawyers will often place themselves on the board of directors when forming corporations for clients.
- Officers: All corporations must have a President, a Treasurer and a Secretary. Like the directors they may be real or fictitious persons. Often, the officers and directors are the same people. However, it is recommended that the President is not the same person as the Secretary. There can also be as many Vice-Presidents as desired.
- Domicile: It is recommended that the company be domiciled in Panama, though Panamanian law allows for it to be domiciled anywhere in the world. However, the corporation must have a domiciled agent in Panama, whom is either a practicing lawyer or a law firm. For tax reasons, you should understand that the domicile of registry does not have to be the domicile of business.
- Duration: Panama law allows for corporations to be renewed indefinitely, though it is also possible to set a time limit in years for the company.
- Timeframe: In Panama, the length of time to register a corporation is usually a week to 10 days. The quickest way to form a corporation is to actually be present in Panama because mail is slow and the necessary documentation can take a long time to arrive.
In order to establish the company in Panama, after incorporating the company, business owners must register with the Tax Department, register with the Ministry of Commerce, register with Records of the Social Security Board, register with the Ministry of Labor, and register with the local town hall. Foreigners with businesses in Panama can only obtain Type A commercial licenses due to restrictions of certain types of commercial activities reserved for Panamanian citizens. After obtaining citizenship, business owners are eligible to obtain Type B commercial licenses.
For specific information on what to do after forming a corporation, see Investing and Doing Business in Panama.