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IMPROVEMENTS IN Decree Law 5 of
1997 has been enacted by the Executive Branch which contains changes to the
Commercial Code (C.C.) and Law 1 of 1984 on Trusts. The new legislation has provisions which
have the following effects: improve recordkeeping requirements for Panamanian
business associations (corporations, partnerships, etc.) doing business
locally in CORPORATIONS 1. The Decree Law
adds provisions to Article 11 of the Commercial Code for redomiciliation. Foreign corporations seeking to be
chartered under Panama Law are required to record in the Panama's Public
Registry a certificate of good standing from the jurisdiction of origin,
legalized copy of the minutes of the meeting approving the redomiciliation and Articles of Incorporation with
amendments conforming to Panama Law.
Once recorded in 2. Panamanian
corporations are now allowed to continue under the laws of another country
and redomiciliate abroad, as long as the
corporation has no outstanding corporate franchise flat taxes. This is conducted by recording in 3. Corporate names
may be reserved for a term of 30 days through lawyers in Panama, once the
Public Registry confirms their availability (Article 38A C.C.) for a US
$25.00 fee (Article 317 Fiscal Code).
Financial statements may also be recorded at the corporation's option
(Article 58A C.C.) duly certified by a Certified Public Accountant. 4. Acts or
contracts may be delivered by telefax or other
electronic means, in addition to telephone, as long as the parties or their
representatives have been directly in communication. This is also applicable
to directors, shareholders, partners or liquidator meetings, being required
that minutes be drafted indicating the means whereby the participants were in
communication. Company resolutions are
valid even if they are signed in different places and dates (Article 203
C.C.). Corporations existing before
the enactment of this amendment must modify their Articles of Incorporation accodingly. 5. Pursuant to the
new Article 580A (C.C.), general or special powers of attorney ("mandato") are valid from the date they are granted
in public deed or private document with a date confirmed by Notary Public and
may be optionally recorded in the Public Registry. Articles 57 (Section 7) of
the Commercial Code and 1776 (Section 7) of the Civil Code that required said
recordation have been abrogated.
Revocation of the recorded power of attorney must also be recorded
unless it is not required from the text of the original document. However, Article 1776 (8) of the Civil Code
still requires recording a power of attorney for the sale of real estates
located in Panama. 6. Juridical
persons (corporations, partnerships and other business associations and
entities), in addition to individuals, may form a corporation or company of
any kind and act as its shareholders, directors, officers, managers and
liquidators (Article 249 C.C.). This
amendment allows the possibility of a Panamanian or foreign corporation to
act as director or officer of another corporation which is similar to the
capacity that corporations from other jurisdications
have (i.e. 7. Corporate assets
may be transferred, assigned and disposed of by managers, directors,
attorneys-in-fact, in addition to shareholders and partners as originally
provided, unless the Articles of Incorporation provides otherwise. ACCOUNTING BOOKS 1. The requirement
of merchants to have accounting books has been expanded to allow their being
carried out not only in ledgers, but also through electronic means or other
mechanisms allowed by law as long as they may be printed (Article 71 and 93
C.C.). The same is applicable to the
corporate books for Shares and Minutes required under Law 32 of 1927 on
Corporations. Required books no longer
need to be sealed by a civil judge (Article 76 C.C.abrogated). 2. Accounting books
may be conducted in the number, class or manner the merchant decides, as long
as they are according to generally accepted accounting procedures applied in 3. The documents no
longer required are the Inventory and Balance Book (Articles 73, 79 and 80
C.C.), the Current Account book for businesses under US $500.00 in assets
(Article 74 C.C.), Cash Book (Article 82 C.C.), as well as all related
correspondence (Article 85 and 93 C.C.), allowing instead auxiliary registers
that support the information in the required books. The auxiliary registers and invoices must
be kept until the expiration of the statute of limitations, which varies
until 15 years for taxes without special term. 4. Under Article 78
(C.C.), companies that operate inside of 5. Under the new
Article 87 (C.C.), accounting should be kept by an accountant or Certified
Public Accountant, updated within the following 2 months (increased from 1
month) to the corresponding month.
This article no longer allows merchants deemed as knowledgeable in
accounting to carry their own accounting and no longer makes an accountant
severally liable for the omissions and infringments
related to the accounting books.
However, fines for infringments of this
article have been increased from a maximum of US $50.00 to US $500.00. 6. Fines increased
from a maximum of US $100.00 to US $500.00 (for each official request for
books that is disobeyed) are applicable for infringments
of Article 93 (C.C.) on the duty to keep books, and are now expanded to
include the omission by legal representative's of a corporation in keeping
and showing accounting registers and removing books to countries where they
are not easily accesible. Fines are increased from a maximum of US
$500.00 to US $5,000.00 (per offense) for infringments
of Article 94 (C.C.), now expanded to include the entry of simulated
transactions or omitted any of them. 7. Financial
statements have been further regulated in Article 95 (C.C.), allowing their
drafting under generally accepted accounting principles. Starting from 1997, those statements must
include a general balance sheet, statement of results, statement of
shareholders equity, including change in retained earnings and statement of
cash-flow. Statements must be issued withing 120 days of the end of the fiscal year and be
kept available to local authorities. BROKERAGE
PROVISIONS 1. Legal provisions
on brokers have been updated to make brokerage contracts subject to
applicable law, local custom and practice, allow the use of single or global
certificates represented by documents, account entries or any form allowed
under securities practice, such as mechanical, manual, electronic, magnetic
or other method that, guarantees their truthfulness (Article 144, 144A C.C.),
regulating sales by commissions (Article 149A C.C.) and allowing buy-back in
stock exchange for up to a 3 year-term (Article 149B C.C.). 2. Provisions
setting a one-month term for public secutirites
operations and prohibiting commissions for non-authorized broker have been
replaced by the requirement of previous consent by the National Securities
Commission for any local or foreign securities offer from or within Panama
(Article 147 C.C.) and, allowing representation in stock exchanges only by authorized
stock sellers (Article 148 C.C.). 3. Operations
perfected outside of PLEDGING OF ASSETS 1. Article 820
(C.C). on sale of pledged personal property has been
modified to allow the pledgee or receiver to
transfer the assets with 30 days written previous notice to the pledgor unless otherwise agreed to. If no method for valuation has been agreed,
an impartial appraisal is required before the sale. 2. An important
improvement is that assets located outside of Panama may be pledged in
general form without delivery to the pledgee, pusuant to Article 829A (C.C.). This general pledge of assets must be
executed in public deed or private document authenticated by the Notary of
the place of execution and, if granted abroad, legalized by consul or apostille. The
pledge instrument must be recorded in the Public Registry, thereby having preferrence over other non-priviledged
credits. TRUSTS (Law 1 of
1984) 1. When the trust
deed is executed in a private document, the signature of the trustee or its
attorney-in-fact, in addition to that of the settlor,
must be authenticated by a Notary Public, which under the amendment needs not
be from 2. Article 35 on
the taxation for Panama trusts operating inside Panama has been rephrased to
continue the exemption from income tax gains from investments in residential,
housing, industrial or urban development projects within Go here
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