The Panamanian Commercial Code along with Law 32 of 1927 constitutes the regulatory framework for Panamanian corporations, characterized by its stability, as it has only been subject to very few amendments or additions since enacted on April 1, 1927.
Besides the commercial activities that can be performed by any Panamanian corporations, they are commonly used for asset protection and as holding companies as part of company restructuring and business continuity strategies. Panama law offers the flexibility and clarity that modern commercial law requires to facilitate a transparent and efficient governance of companies under international compliance standards,
Although within the Latin-American region there are not many substantial differences given that most of our countries are civil law-based systems, it is noteworthy:
• Spin-offs are expressly regulated as the process by which a company partial or completely divides its assets and transfer it to one or more beneficiary companies, having the same partners or shareholders. According to our legislation, if the transfer is made at book value, the spin-off process will be tax exempt.
• Cross border mergers are also permitted by our corporate law and can be executed among one or more companies, provided that the foreign corporation is registered at the Panamanian Public Registry prior to the merger.
• Re-domiciliation is another option contemplated in our corporate law that allows a corporation validly incorporated under a foreign law to voluntarily choose to continue its existence under the Panamanian corporate law, notwithstanding the provisions of its original jurisdiction.
• Corporate asset liquidation can be completed up to 3 years after the entity has been dissolved. During this period, the directors will act as trustees, with legal powers to carry out all the processes required to complete the liquidation process.
In addition to the Panamanian corporations, it is relevant mentioning the existence of private interest foundations, which combines the benefits of a trust and a corporation as a planning and asset protection instruments for holding purposes, investment portfolios and heritage organization. Law 25 of 1995, inspired by the Law on Mixed and Family Foundations of the Principle of Liechtenstein, reinforced Panama’s essential role as one of the overseas jurisdictions preferred by the international business and financial community.