Corporate Structures: Establishing a Company or Foundation in Panama?
Panama stands out as an outstanding jurisdiction for both investors and entrepreneurs looking to identify a new market to generate or safeguard their income. Although executives are often proposed the creation of companies, typically in the form of anonymous societies, we should not overlook other organizational models, such as foundations.
What is the difference between a company and a foundation?
The fundamental difference between both structures lies in the fact that while anonymous societies are established to carry out commercial activities regularly and directly, private interest foundations do not have the authority to conduct commercial activities regularly or directly; instead, they must do so through companies. Private Interest Foundations are established for the purpose of asset protection, holding management, possession of various assets, and related functions.
Similarly, a company must have a Board of Directors composed of three (3) natural persons of any nationality, fulfilling specific roles such as President, Secretary, and Treasurer. In contrast, Private Interest Foundations must have a Foundational Council that can be comprised of either one (1) legal entity or three (3) natural persons of any nationality, occupying the roles of President, Secretary, and Treasurer.
Another significant distinction is that, in the case of Private Interest Foundations, a document known as Bylaws is issued. This private document outlines the main and secondary beneficiaries, as well as the provisions that will apply in the event of the primary beneficiary’s death. In the context of companies, there are only nominative share certificates, which must be endorsed for transfer. If a shareholder does not endorse the certificate and passes away, a legal process of testamentary or intestate succession may be required.
This complexity can be avoided through the structuring of a Private Interest Foundation, which is often recommended when the client operates through an Anonymous Society. The Private Interest Foundation can act as a holding for the shares of the company, providing an efficient and simplified solution in cases of ownership transfer and succession planning.
At Cajigas & Co., we are here to help you safeguard your legacy. Contact us immediately for advice tailored to your needs. The creation of these structures in Panama can be a straightforward and uncomplicated process with the guidance of professionals at your disposal.