Corporate Law at Panama
Sure! Here’s an overview of Corporate Law in Panama — one of the most popular jurisdictions for international business due to its flexible and business-friendly legal system:
Corporate Law in Panama
1. Legal Framework
Panama’s corporate law is primarily governed by the Panama Corporation Law (Law 32 of 1927), which has been amended several times.
The law is designed to be flexible, modern, and accommodating for both domestic and international businesses.
Panama is famous for its offshore corporations due to favorable tax laws and confidentiality protections.
2. Types of Business Entities
Corporation (Sociedad Anónima): The most common form, especially for international business.
Limited Liability Company (LLC or Sociedad de Responsabilidad Limitada):
Branch of Foreign Company: Foreign companies can open branches.
General and Limited Partnerships
3. Panama Corporation (Sociedad Anónima)
No minimum capital requirement (commonly set at $10,000 or lower).
Shareholders: Minimum 1 (can be natural or legal persons).
Directors: Minimum 3, but the law doesn’t require Panamanian residents.
Bearer Shares: Previously allowed but now restricted or abolished under reforms.
No requirement for public disclosure of shareholders or directors in the public registry (confidentiality maintained via nominee services).
No residency or nationality requirement for directors or shareholders.
No need to hold meetings in Panama.
4. Taxation and Reporting
No Panama tax on income earned outside Panama (territorial tax system).
Offshore corporations generally exempt from Panama income tax if they do not conduct business within Panama.
Minimal reporting and audit requirements for offshore companies.
Registered agent and office required in Panama.
5. Company Formation
Typically fast, taking 1-2 days.
Requires filing Articles of Incorporation with the Public Registry.
Use of nominee directors and shareholders is common to maintain privacy.
Requires a registered agent and a local registered office.
6. Corporate Governance
Flexible corporate structure.
No strict formalities for annual meetings or minutes (though recommended).
Board of Directors manages the company.
Shareholders can be individuals or corporations.
7. Advantages
Strong confidentiality and privacy protections.
No minimum capital requirements or residency restrictions.
Tax advantages for offshore income.
Stable legal framework.
Widely recognized and respected jurisdiction for international business.
8. Challenges & Considerations
Increased global pressure on offshore jurisdictions to increase transparency (Panama complies with international AML and CRS standards).
Requires a local registered agent.
Companies must avoid doing business directly within Panama to maintain offshore tax status.
Summary
Panama’s corporate law is a prime choice for international business, asset protection, and offshore company formation due to its flexibility, confidentiality, and tax advantages. It is often used for holding companies, investment vehicles, and trading companies.
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