Panama Private Interest Foundations
We will comment on some additional details about the Panama Private Foundations, which although a little technical are important for the better understanding of the whole legal structure.
About its Foundation Council.
A body known as the Foundation Council (equivalent to a Board of Directors in a corporation) shall be appointed in a Panama Private Interest Foundation. The Foundation Council shall be appointed at the time of incorporation and it shall be formed by no less than three (3) members in case of persons or only one (1) member in the case of corporate entity. It is not required for any of its members to be Panamanian.
The powers and responsibilities of the Foundation Council shall be established in the Foundation Charter or in the Regulations. As a general rule, the Foundation Council shall be responsible for carrying out the objectives of the foundation and to administer the assets of the foundation according to its Charter or its Regulations.
Please bear in mind that the Foundation Charter and/or the Regulations of a foundation may also limit or expand the powers of the Foundation Council to suit the wishes of the client / founder. Additionally, the founder might appoint himself as a member of the Foundation Council and require that certain decisions be taken by unanimity.
All such acts may need to be previously authorized by a protector or other supervisory body. Moreover, the founder may reserve for himself or for any other person the right to remove the members of the Foundation Council. This disposition must also be expressly established in the Foundation Charter.
Registration fees and taxes.
Private Interest Foundations shall only pay registration fees and annual taxes a little higher than the Panamanian corporations. The Panamanian Foundation is considerably less expensive to set-up, maintain and dissolve than its European counterparts.
As in the case of corporations, the amount of the registration fees will depend on the foundation’s original capital. The Private Foundations annual franchise tax is US $400.
Controversies may be resolved by arbitration.
Article 36 of the Foundations Law makes it clear by statutory disposition that any controversy arising in connection with the foundation may be resolved by arbitration, thus avoiding the need to litigate through the judicial system of Panama. The arbitration process may take place in any location and may be subject to any procedure established by the founder or any other authorized body of the foundation.
Protector and other Supervisory Bodies.
The founder may also establish other special arrangements in order to retain control or supervision over the foundation assets during his or her lifetime. The founder may appoint protectors, auditors or other supervisory entities to supervise the acts of the Foundation Council prior to or after his/her death, since article 25 of the Foundation law expressly authorizes the creation of such additional entities or supervisory bodies.
The figure of the protector has been widely used in Common Law jurisdictions when settling a trust. This is yet another innovation of the Panamanian Law which further ensures the safety of the instrument and, thus, makes it even more attractive as an estate-planning instrument.
Forced heirship provisions.
Following a trend adopted in the trust legislation of some Common Law jurisdictions like BVI, Belize, Grand Cayman, The Bahamas, as well as Jersey and Guernsey, Panama’s Private Foundation Law (Article 14) specifically provides that forced heirship laws of another country shall not affect the foundation or its validity and shall not prevent the attainment of its purpose as provided in the Foundation Charter or its Regulations.
Moreover, the foundation assets will not be part of the founder’s testamentary estate -having become legally autonomous – the legal norms of his/her personal law cannot restrict or limit in any way the structuring of the rights of the beneficiaries of the foundation. In addition, formalities required for the execution of wills shall not be applicable to Panamanian Private Foundations.