Private Interest Foundations, an Effective manner to protect your wealth.
By: G. Tapia Calviño
Act 25 of June 12 of 1995 created a juridical institution, a hybrid of the corporation, a donation and a trust, and works as an effective mean to protect one’s wealth and assets; this is the “Private Interest Foundation”. Some characteristics of this juridical institution are:
Definition of a Private Interest Foundation: This is a juridical entity created according to Panamanian Law, as non profit organization though it may from time to time engage in commercial activities and may also exert those rights resulting from titles representative of corporations capital stock, provided that these titles belong to the Foundation. The assets of the Foundation are devoted exclusively for the objectives stated in its constitutive document and, once formed, sell and execute contracts, as any other corporation or juridical entity.
Constituting a Foundation: one or more persons may form a foundation, whether directly or through another person.
Essential requirements to constitute a Foundation:
- A name in any language in Latin alphabet. The name is to include “fundación” or “foundation”
- Initial capital stock, which shall be no less than US$ 10,000.00.
- Name and address of the juridical entity (another foundation, corporation or association) that will act as Foundational Board, or of the three individuals in which said board shall consist.
- Address of the Foundation.
- Objectives of the Foundation.
- How the beneficiaries shall be selected.
Beneficiaries of the Foundation: Different from corporations, where the beneficiary is the shareholder, in a Foundation the beneficiary is the individual or corporation designated by the founder, and it may be the founder itself.
Administrative body of the Foundation: Making a comparison, we may indicate that, different from the corporations where there is a Board of Directors, the Foundation has a Council, named “Foundational Board”, which may consist only by another corporation, or by at least three individuals.
This Board may likewise grant a general power to an individual or a corporation to manage the Foundation.
Assets transferred to the Foundation: These constitute the patrimony that may not be seized or impounded by reason of claims not related to operations of the Foundation. Creditors of the founder have a term of three years since the Foundation is constituted to claim that assets have been transferred to the foundation in fraud against its rights. Any transfer of assets, from the Foundation to the spouse, sons, daughters or any of the parents of the Founder, is exempted from transfer taxes. The Foundation and the assets transferred to it, may be revoked only if so provided in the document constituting the Foundation.
Taxes and Annual Fees: Because a Foundation does not engage in commercial activities regularly, there are no payable taxes for its operation. The annual fees will be alike those for a corporation: US$300.00 as annual fees, US$150.00 of resident agent and US$100.00 per each member of the Board appointed by our Firm,
“Post Mortem” effects: Panamanian law allows constituting a foundation to have effects from the date it is created or post mortem. For Foundations constituted to have effect post mortem, the presumption if that the Foundation has existed prior to its founder’s decease.
