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Panama Corporations and Bank Accounts: latest news

The Republic of Panama is a globally popular jurisdiction for doing all kinds of business, and is recognized as the best country to launch a corporate business entity. We will take you through the basic steps towards registering a company in Panama.

Panama may have taken a reputational hit with the Panama Papers, but it is now back up and running. It is well known as the “grandmother of all tax havens” having been in the offshore business since 1929. Even today, there is far more offshore business done in the Republic of Panama than in most of the Caribbean combined.

Panama

In 2019, Panama, ranked 11th, is one of the world’s Top 20 countries that attract the most global investment ranked by the World Bank.

According to the Global Finance Magazine’s dated October 2019, the flow of FDI to Panama increased by 21%. According to international experts, the country was able to move up several points in the global FDI ranking thanks to a record number of mergers and acquisitions.

Establish a Corporation in Panama. A Legal Entity Called Sociedad Anónima

Corporations in Panama are called Sociedad Anónima, which means “Anonymous Joint Stock Company” or “Anonymous Public Limited Company”. Panamanian companies have the status of a legal entity, and are the most popular businesses that Panamanians, foreign business persons and investors register in the country.

Companies in Panama are used for many different purposes. When incorporating an entity, you should list in the corporate documents as many types of business a corporation may engage in as possible, even though the company may actually engage in only some of them.

These could be such purposes as: acquisition and ownership of assets, tax planning, investment, commercial or industrial operations, asset protection, and transaction planning within large financial holdings.

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The Main Advantages and Requirements for Establishing Sociedad Anónima in Panama

  • A foreigner can own 100% of shares in a Panamanian corporation. There are no restrictions on the nationality of the founder and no residency requirements.
  • High level of data security for the beneficial owner and company shareholders. Professional directors may be used officially.
  • The minimum required number of shareholders of a company is one (1) person (natural or legal).
  • There are no requirements for the size of the company’s paid up share capital (USD 10,000 is standard)
  • Absence of state control over corporate capital.
  • Every company must have a registered agent within the country.
  • Appointment of a registered agent of the company (official representative for service of legal documents) is required.
  • The company founder is not required to be present at the registration of a Panamanian company. Registration procedure may be carried out on the basis of a Power of Attorney provided by the founder to a local law firm, or by using nominees. The company can be registered within 5 to 7 business days. Taking into account the opening of a corporate bank account in Panama and obtaining the necessary licenses allowing the company to operate locally, the time needed for the complete registration process may extend to 6 to 7 weeks.

First Steps towards Setting Up a Panamanian Corporation

  1. The founder must enter into contract with InternationalWealth (Offshore Pro Group) or with a private lawyer. The lawyer will be the official legal representative of the company, authorized to represent it before the public authorities of Panama.
  2. The company shareholders must provide suitable KYC and due diligence documents.
  3. It is necessary to draw up the company management rules, i.e. the Articles of Association, that will be presented by a lawyer before a notary public.
  4. The company’s incorporation documents will be registered with the Panamanian Business Registry.
  5. After that the Certificate of Registration of the legal entity (company) will be registered with the local authorities.
  6. If the company intends to do business in Panama, a relevant license will be obtained for the company (according to the business profile) so that the business entity would be able to run commercial operations. This is not necessary for holding companies or those doing business only outside Panama.
  7. A corporate bank account will be opened with a bank in Panama (this is optional, as corporate accounts may be both Panamanian and foreign).
  8. Minimum deposit is to be placed in the corporate account.

Defining the Corporation’s Name

When registering a Panamanian corporation, the incorporator must submit a minimum of three (3) company names. This is due to the fact that the name presented for registration may not always meet the requirements of uniqueness. THe register has been operational since 1929 so as you can imagine, many good names are already taken. 

Foreign words may be used in the name, but the following words or their abbreviations must be used: Sociedad Anónima (SA), Corporation (Corp.) or Incorporation (Inc.). THe name may also be officially registered with translations in various languages, effectively giving the company various different identities.

For a company name it is forbidden to use words that might associate a corporation with a government agency, which would ultimately mislead consumers. Such prohibited words include: Trust, Foundation, Finance, Bank, Insurance and others.

Company Shareholders in Panama

The shareholders or holders of stock in a corporation are its owners. The level of ownership of a company depends on the amount of equity participation in the company, i.e., the number of shares purchased by each shareholder.

A Panama corporation may be organized by one or more shareholders, who may be individuals or legal entities. An important aspect about the corporation is that the shareholders have limited legal liability. This means that they are responsible for the debts of the company and for its management decisions according to the amount of capital invested.

In the case of a sole shareholder corporation, when opening a bank account, the bank may require you to submit a number of additional documents to verify the identity of the ultimate beneficial owner.

According to the new international banking transparency requirements, when opening a corporate bank account, the personal data of the company shareholders must be disclosed to the bank.

Modern corporations are not allowed to issue bearer shares. If an older corporation has issued bearer shares in the past, most banks, and most likely, no banks at all, will open a corporate bank account for such a company. The only solution is to amend the company Statutes to remove the right to issue bearer shares.

Corporation Law of Panama – Law 32 grants shareholders the following rights:

  • Shareholders may make any amendments to the articles of incorporation.
  • They can freely dispose of part or all of the assets of the company.
  • With the consent of the shareholders, a dissolution of the company, mergers and acquisitions may take place.
  • Shareholders may appoint and remove directors of the company, except for those vacancies provided for by the right of appointment of members of the Board of Directors.
  • Shareholders decide whether to use assets as collateral to guarantee payments to third parties (if this right is provided for in the Articles of Association).

Authorized Capital of a Company in Panama

The authorized or share capital of a company in Panama is the amount agreed among the shareholders, which is specified in the Memorandum of Association as the share capital of the company at the initial stage of incorporation.

If necessary, the authorized capital of a Panamanian company can be changed up or down at any time. Usually companies declare the minimum authorized capital of 10,000 US dollars that can be expressed in any currency.

Such authorized capital is divided into the number of 100 shares of 100 USD each. Meanwhile, the company is not obliged to pay the share capital. At the same time, if the company issues shares, they must necessarily be paid for by the shareholders.

The size of the share capital can greatly affect the willingness of the bank to lend to the company. Therefore, if a company in Panama intends to get a loan or credit from a bank in the course of its business, the size of its share capital must be quite relevant. No bank will take the risk of granting a loan in case the size of the company’s share capital is insufficient.

Board of Directors of a Panamanian Company

The Board of Directors are individuals appointed by the shareholders to perform administrative functions and to jointly control and manage the company.

Directors on the Board of Directors shall be elected or removed by the affirmative vote of the shareholders entitled to vote by means of the outstanding shares of the Company.

The minimum number of directors is three (3). These persons may be of any nationality and may be natural or legal persons.

The presence of Panamanian citizens in the Board of Directors significantly simplifies the company registration procedure, as well as that of obtaining various licenses or opening a bank account if desired.

The Board of Directors may draw bylaws for the corporate governance and incorporate them into the Articles of Association (unless originally prohibited by the shareholders, which is spelled out in the Articles of Association).

Members of the Board of Directors are not responsible for the obligations and debts of the corporation, but are fully personally or jointly liable for liabilities imposed on them by the shareholders or for fraudulent insolvency.

That is, directors can be held responsible for the following:

  • Lack of economic efficiency, which is reflected in the capitalization of the company’s shareholder assets.
  • Inadequate bookkeeping in the company.
  • The quality of maintaining records evidencing the true condition of the dividends declared by the corporation.
  • Improper performance of direct duties, knowing violation of Panama law or corporate bylaws or Articles of Association, and violation of decisions made at General Meetings of the corporation’s shareholders.

The Annual General Meeting of Shareholders may be held physically or remotely by online video conference in any country. The place of the General Meeting of Shareholders shall be specified in the Articles of Association.

If this is not mentioned in the Articles of Association, the Shareholders’ Meeting shall be held in Panama. At the same time, if at least one of the company’s shareholders cannot participate in the General Meeting of Shareholders in the remote format, such a meeting may not be held.

Registered Agent and Legal Representative of the Company, Panama Resident

Every Panamanian company must have an official legal representative and a registered agent. The legal representative may be any person of any nationality, while the registered agent must be a Panamanian practising lawyer licensed by the state, or a Panamanian law firm. Where Offshore Pro Group registers Panama corporations, we use our in-house law firm by default as registered agent.

When setting up a Panamanian company, the participation of a registered agent is a legal requirement. It is the registered agent who will receive service of any leal documents on behalf of the company, such as court proceedings.

Legal or Fiscal Company Address in Panama

One of the main minimum requirements of Panamanian law for company registration in Panama is that the company must have a legal address in the country. This address is registered with the Panamanian Tax Office. It is customary to use the address of the registered agent lawyer or law firm.

Also, this legal address will receive official notices to the company from the public authorities of the country. If the company keeps its management outside Panama, this legal address may be the legal address of the registered agent of the company.

At the same time, given the tougher international rules on transparency, and so that a Panamanian company is not erroneously considered to be a shell company, it can have a physical corporate office in the country with the local service personnel. This way, the company in Panama will meet all the rules of economic substance and will be able to confirm its real presence in the jurisdiction.

Opening of a Corporate Account for a Panamanian Company

Opening of a corporate account is the final stage of the complete registration of a corporation in Panama. Panama’s banks are some of the most reliable and secure institutions in the world. There are about 80 international banks in the country, among which are the world’s most renowned entities.

Bank requirements for opening an account in Panama may vary significantly from one bank to another. Most will require the physical presence of the signatories and beneficial owners in Panama, but a significant number of banks are now allowing remote opening, especially due to the Covid-19 pandemic.

To open a corporate account for a company, you will need to prepare the following documents:

  1. Color copies of passports of company directors, shareholders and persons having access to the corporate bank account.
  2. Color copy of the Panamanian Company Certificate of Incorporation.
  3. Color copy of the Articles of Association of the corporation and all amendments thereto.
  4. Two reference letters from the existing banks of the company’s directors and shareholders. (Nominee directors always have bank references available)
  5. Two professional letters of recommendation from partners to be submitted on the company letterhead with contact details of the entity providing services to the company. These should preferably be issued by lawyers or accountants.
  6. A letter of recommendation from the bank for an existing legal entity, which was used by the applicant to open an account prior to the establishing of a company in Panama.
  7. Proof of origin of funds and business operations. Filing out of financial statements on income and incurred losses of the corporation and its shareholders. If the funds are of foreign origin, these documents must be apostilled.
  8.  Background information detailing the business and nature of its operations, including estimated monthly volume of financial transactions (the estimation must be made for the next 8 months), customers and major suppliers.
  9.  Bank application forms for opening a corporate account from each person authorized to use the company account.

In order to open a basic corporate account for your company, you will need to present as many documents from the list above as possible. However, if you have difficulty presenting anything from the list, you can always talk to your Offshore Pro consultant about what alternatives are acceptable. When clients are transparent, honest and flexible, a solution can always be found if a document is missing..

Register a Corporation in Panama

Company incorporation in Panama allows foreign investors to benefit from the tax and legal advantages of asset protection in the jurisdiction. A Panama corporation is the best instrument for making investments, both in Panama and as a hub to enter the markets of other Latin American countries.

Our experienced experts will advise you on all aspects of doing business in Panama, and will help you with all necessary documents. Do not hesitate to book a free consultation. Please feel free to email us at [email protected] and we will get back to you immediately.

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