On International Women’s Day we commemorate and recognize the struggles and achievements of so many brave and courageous women who have allowed many more to have better personal and professional conditions and opportunities today to reduce the gaps of inequality and generate a fairer society.
Especially for all women that are part of Icaza, González-Ruíz & Alemán, we thank you for your tenacity and valuable work.
On March 6th, we had the honor to welcome Multilaw Chair Carmo Sousa Machado, and CEO Adam Cooke, at our office in Panama.
Multilaw is a global network of law firms bound together. Across industries and practices, active client advice and referrals are shared, with the highest legal standards and local expertise.
We are proud to be part of Multilaw’s global network of law firms and work with them.
Our team enjoyed meeting them, catching up on the latest news, and discussing new projects.
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By: Estefanía Alemán – General Manager of Icaza Trust Corporation
Regardless of our age or the size of our patrimony, it is important to properly organize the assets we own because unforeseen events arise in life. By properly organizing the assets that we own, I mean the following: i) make sure that the assets we acquire are duly transferred in our favor as individuals, or in favor of a legal person of which we are beneficiaries; ii) and plan the destination or succession of these assets once we die so that they are transferred to the people we wish without major legal complications.
We must make sure that the assets we acquire are duly transferred in our favor because on many occasions we think or assume that we have acquired an asset, and later we find out that we are not the owners of the asset because it was not transferred to us according to the legal formalities required for the transfer. Recently a family member told me that he had noticed that the apartment in which he has been living for more than ten (10) years, and for which he has paid a mortgage during this period, is still registered in the name of the developer. I have also come across many cases in which a client believes to be the owner of some shares, and then realizes that they were not endorsed correctly, and the transfer of shares was not recorded in his or her favor in the company’s share register. In my experience, cases in which people believe that they own assets when legally these assets have not been transferred in their favor are more common than we imagine. Therefore, we must review and confirm that the assets in which we have an interest or participation are correctly transferred in our favor personally, or in favor of a legal person of which we are beneficiaries.
The second important point is to plan the destination or succession of our assets once we die. Generally, we do not give importance to this matter because we do not see our death proximate, we let this issue pass by, or we think that an estate planning structure is expensive. However, for a person’s heirs dealing with the estate of their deceased family member is tedious, and painful, and may involve conflicts, time, and money before being able to transfer the deceased relative’s assets in their favor.
For example, when a person dies and has no will or estate-planning vehicle, he or she dies intestate. The intestate succession proceedings can take approximately one year if no conflicts or obstacles arise during the proceedings. If conflicts and obstacles arise within the process, years may pass by before the heirs are able to receive the deceased relative’s assets.
Generally, an intestate succession proceeding involves the following steps:
The intestate succession proceedings involve time, costs, and potential conflicts and obstacles. When a person dies and has a will, the testate succession proceedings are similar to intestate succession proceedings, except that they do not require steps (i) and (iii) above, and possibly involve fewer conflicts because the heirs have been identified. However, the testate succession proceedings also involve time, costs, and legal formalities. Thus, the transfer of the deceased’s assets does not occur automatically in favor of the heirs.
The most efficient, organized, and transparent way for a person to transfer assets in favor of his or her heirs is through a Private Interest Foundation or a Trust. Both vehicles have different legal characteristics, but a common objective, which is to distribute and transfer assets in favor of the Beneficiaries that apply in each case in an automatic and efficient manner. Depending on the idiosyncrasies of each patriarch, and the value and variety of the estate, the Private Interest Foundation or Trust can be simple or complex to fulfill the wishes of the person upon his or her incapacity or death.
For more information on Private Interest Foundations and Trusts, contact us at icazatrust@icazalaw.com.
Icaza Trust Corporation participated as a sponsor in the STEP Latam Conference 2022, held September 22-23 at the Hilton Hotel in Panama. Every year, the event brings together renowned lawyers and banking, fiduciary and accounting professionals related to estate planning, structuring and management in Latin America.
At the event, Estefanía Alemán, our general manager, and Luis Martínez, our deputy manager, had the opportunity to share with colleagues from the region and learn about new trends in the fiduciary world.
Take a look at some snapshots of their participation by clicking on the images below.
By: Ayleen Quintero – Associate
The permanent residence permit as Qualified Investor was created through Executive Decree No. 722 of October 15th, 2020, and it is a migratory category that grants permanent residence in Panama to those foreigners who invest from five hundred thousand dollars (US$500,000.00) of funds coming from abroad, under one of the four (4) modalities that we shall explain subsequently.
Notwithstanding, it is important to emphasize that said Decree also contemplated an exception that consists of the benefit of being able to apply for this residence, with a minimum amount of three hundred thousand dollars (US$300,000.00), provided that the applicant chooses one of the modalities that are related to the investment in the purchase of a real estate property. This exception shall be in force only until October 15, 2022.
The modalities under which you can apply for this category are Real Estate Investment, Real Estate Investment through a Promise to Purchase Contract (both by Investment of US$300,000.00, only until October 2022), Investments through a Broker-Dealer House (US$500,000.00), and Investment through Fixed Term Deposit in the Banking Sector (US$750,000.00).
Under this category we could point out, among other requirements and general conditions, that the most relevant points to be evidenced within the application are:
How soon is the permanent residence under the Qualified Investor category approved?
The application for Permanent Residence under the Qualified Investor category is approved within thirty (30) working days and shall allow the foreigner applicant to acquire the permanent resident card issued by the Electoral Court of Panama, which shall be the new identity number in Panama for all approved Qualified Investors.
After obtaining Permanent Residence, how long shall I wait to apply for Panamanian nationality?
The naturalization or proceeding to obtain the Naturalization Letter is the formality that allows the permanent resident to opt for Panamanian nationality and, therefore, also obtain the right to carry a Panamanian passport. This proceeding can be carried out after the foreigner complies with any of the following conditions:
For the above reasons, below is a summary of how many years nationals of some Latin American countries must wait, on a case-by-case basis.
How long should I wait to become a Panamanian citizen?
One year for nationals from Colombia and El Salvador.
Two years for nationals of:
All others not mentioned above may apply for naturalization after 5 years.
After acquiring the permanent residence, what obligations do I have?
Concerning the migratory obligations that are derived, the main obligation shall be to visit Panama before two (2) years have elapsed outside the country, or else, the permanent resident shall lose the residence and must either initiate another proceeding or request the reactivation of the Permanent Residence; however, this proceeding has its conditions and supporting documents that must justify the relevant reason why the foreigner could not enter the country during the said period.
By: Ayleen Quintero – Associate
The Retiree and Pensioner residence permit (formerly also known as Tourist Pensioner), is an immigration category that grants permanent residence in Panama to those foreigners who have a retirement or pension, received from either a foreign government, an international organization, or a private company.
The main requirement to apply for this category is to have a certification proving the condition of retiree or pensioner, issued by the corresponding government, agency, or company. It must be evidenced that the interested party receives a retirement of not less than one thousand dollars (US$1,000.00) monthly and for life, implying that the retirement or pension must be received for his/her lifetime.
The foreigner who wishes to apply for this residence may also include his/her dependents (parents, spouse, and children), proving additional economic solvency of two hundred and fifty dollars (US$250.00) monthly for each of the dependents, which can be evidenced either through the pension or through a local bank reference letter issued in favor of the main applicant. It is important to note that the amount of one thousand dollars (US$1,000.00) required under this category can also be the product of the sum of the pensions of the spouses.
The law also contemplates the possibility of the applicant foreigner purchasing a property under personal title in the national territory. In that case, if the same is for an amount greater than one hundred thousand dollars (US$100,000.00), the certification that evidences the condition of retiree or pensioner may be for a minimum of seven hundred and fifty dollars (US$750.00).
The permanent residence as a Retiree and Pensioner has the particularity that the costs related to the payment of immigration fees are low in comparison with other categories of residence and does not require an additional investment to obtain the approval of the Permanent Residence.
On the other hand, we must emphasize that there are specific benefits that the Law grants to those foreigners who have this approved Retiree and Pensioner Residence Permit, which are listed below:
It is important to point out that in Panama there are also multiple benefits granted by law to nationals and foreign retirees or pensioners who are residents of Panama, that is, for those women who are fifty-five (55) years of age or older and men of sixty (60) years of age or older. We have summarized below some of the benefits that we consider of greater relevance:
If you are interested in applying for this type of residence and you meet the requirements mentioned above, here is a list of brief steps so that you can begin your immigration formalities.
The time that the National Immigration Service takes to review each application form will depend largely on the volume of applications that the institution has; however, a good point of reference is the temporary card which is issued to the foreigner and dependents once the application form has been submitted, which is valid for six (6) months. This is the approximate time that permanent residence formalities currently take.
By: Ricardo Ceballos
According to numeral 23 of Article 93 of Law 284 of February 14, 2022 on the Horizontal Property Regime, the administrator of the Horizontal Property (P.H.) shall have the obligation to handover to the Board of Directors, once the contractual relationship has ended, all documents pertaining to the administration and those that have been placed under his custody by the latter, which may include Books of Minutes of the Board of Directors and Minutes of the Assembly of Owners, account statements, correspondence, documentation related to bank accounts, keys of the administration office and the property. Furthermore, all those under its responsibility, for which a Minutes of Handover shall be taken and signed by the administrator and a representative of the Board of Directors.
From the above-mentioned, correspondence is very important documentation that must be handled with security, protecting it from distortion. It is for this reason that we recommend that the Boards of Directors make use of personalized e-mail accounts for the P.H., as well as that all the equipment used for administration purposes be for their exclusive use. Likewise, a technological equipment shall be used to store all the documentation and keep a backup of the same, which should always remain under the control and supervision of the Board of Directors.
The same would apply for the licenses of the different softwares that are used for the same purposes and that require to be used by the administrator due to his functions, we recommend that those be of exclusive use of the P.H., as, for example, the software for accounting, as well as for any other application, with the objective of having a healthy administration.
To adapt an office in the premises of the P.H. would be ideal, so that all the work or functions of the administrator are carried out within the P.H., in this way the service provided would be more productive and at the same time all the documentation mentioned in numeral 23 of Article 93 would be protected, said documentation should be kept in these offices under the custody of the Board of Directors and the Administrator.
Taking into account the aforementioned suggestions, the Minutes of Handover would be more expeditious and safe, which would end with a process of the contractual relationship to the satisfaction of the parties, even so the drafting of a Minutes of Handover signed by the administrator and the representative of the P.H., would be the most recommendable, in order to evidence that all the documentation that rests in the offices of the P.H. Administration is mentioned in the Minutes and in this way to perfect in a complete way the handover of the administration to another administrator or to the Board of Directors.
Keep in mind that an administrator can be a natural or juridical person, therefore, in case of being a formal company according to the law, that is to say a juridical person, it is important to check that the person who acts in representation of the juridical person or company, is the proper or designated person, since it may be necessary that she/he sign certain documentation, among these, the initial contract to hire the administration service.
For assistance regarding Real Estate in Panama, contact us at consultas@icazalaw.com.
The Board of Directors of a Panamanian corporation, pursuant to Article 51 of the General Corporations Law of Panama (Law 32 of 1927, hereinafter “the Law”), may exercise all the powers of the corporation, except those that the Law, the Charter of Incorporation or the Bylaws confer or reserve to the shareholders. Therefore, the Board of Directors is competent to manage and direct the business of the corporation in a general manner and its powers or authorities, among others, include the following:
Due to the broad management powers and authorities that directors generally hold, under Panamanian law it is understood that the relationship between them (the directors) and the shareholders and the corporation is that which defines the relationship between an Agent and a Principal. Directors of a corporation are deemed to have been given a “mandate” to manage the business of the corporation and, therefore, are liable to execute their mandate under the duty of care standards held by Agents and may be personally liable for negligence in the exercise of that duty and mandate.
Article 444 of the Panamanian Code of Commerce establishes that directors shall not be personally liable for the obligations of the corporation, but shall be personally or jointly and severally liable, as the case may be, to the corporation and to third parties in the following events:
Nevertheless, the same Article adds that those directors who have protested in due time against the resolution of the majority or those who have not attended with just cause shall be exempted from liability. Liability may only be demanded by virtue of a resolution of the general shareholders’ meeting.
In addition to the provisions of the Code of Commerce, Article 64 of the Law additionally lists certain acts or events in which the directors who have given their consent and that thereby affect the capital stock of the corporation, may be jointly or severally liable to the creditors of the corporation for the resulting damages. Such acts are the following: (i) if any dividend or distribution of assets is declared or paid that reduces the value of the corporation’s assets to less than the amount of its liabilities, including in this the capital stock; (ii) if the amount of the capital stock is reduced; (iii) if any false statement is given or any false report is rendered on any material point.
As a final recommendation to our article, every director in the exercise of his/her functions must know and analyze in detail and prior to his/her appointment as such, which are his/her functions, powers, obligations and liabilities in the company’s management, since they may vary from company to company based on the provisions of its Charter of Incorporation, bylaws or resolutions of the Shareholders’ Assembly.
For assistance regarding Panamanian Corporations, contact us at igranet@icazalaw.com.
By: Luis Martínez – Icaza Trust Corporation
Given the current socioeconomic and financial circumstances, the increase in unemployment and informality, it is necessary for the economic reactivation to be swift and effective.
The Panamanian state has created various tools to influence economic growth in different areas and in this article we will address a current success story that is yielding visible results. This is the case of the Microcredit Trust Fund in Panama (Fidemicro-Panama).
The Fidemicro program, which was established by Law 72 of 2009, is a fund that functions as a second-tier bank. The State contributes funds to a trust and those funds in trust are managed independently by a trustee entity chosen through a public bidding process, in this case Icaza Trust Corporation (I.T.C.). The trustee, on behalf of the trust, grants loans in a transparent manner and with high administrative standards and risk analysis, to financial institutions throughout the country, so that they have liquidity to be able to place loans to the various micro, small and medium-sized enterprises (MSMEs) and entrepreneurs in the country.
This Trust Fund performs the function of second-tier banking by providing financial resources to first-tier operators, who with such resources and at their own risk, shall make placements and recoveries from their users and clients, expanding and consolidating their microfinance services at interest rates that must be competitive.
It should be noted that lending money to MSMEs is an essential pillar for the development of the Panamanian economy. However, in general, traditional banks do not cover them, for reasons such as profitability, lack of resources, or low risk tolerance or appetite. After analyzing some statistics, we have realized that the appetite for credit in this sector is important and promising.
Likewise, in order to achieve sustained and less unequal growth, Panama needs to encourage its population to create companies and businesses that generate value and jobs. This objective can be achieved more productively with financing focused on the small business ecosystem.
Since its inception, the Fidemicro-Panama trust has placed resources to more than sixteen (16) financial companies, one (1) bank, one (1) rural savings bank and six (6) cooperatives.
Beneficiaries
(percentages)
Distribution of loans by province
(millions of dollars)
Disbursements by area
(percentages)
In turn, these financial entities have been able to place these resources to more than eleven thousand one hundred and seventy-seven (11,177) final recipients, of which approximately forty-one percent (41%) are women and fifty-eight percent (58%) are men.
If we break down the loan totals by province, we find that the Province of Panama has received disbursements of close to fifteen million dollars (US$15,000,000.00) and the Province of Chiriqui has received approximately twelve million dollars (US$12,000,000.00). The area of Los Santos and Herrera has received an amount close to four and a half million dollars (US$4,500,000.00), and Veraguas has received an approximate amount of three million seven hundred thousand dollars (US$3,700,000.00). The remaining of the country’s provinces have received an average of five hundred thousand dollars (US$500,000.00).
Of the total disbursements made, forty-three percent (43%) of the funds placed have been destined for rural areas, while fifty-seven percent (57%) of the funds have been placed in urban areas.
This fund, whose origin is public, but which is managed under the tutelage of a credit regulation and administered by an independent trust company, with total transparency and specific rules and adhering to the highest standards of financial and credit risk management applicable in national banking, has managed to be self-sufficient, generate profits and reapply those profits to new loans, being able to achieve a turnover greater than 2.71 times the initial balance contributed by the State. This data reflects the program’s ability to maximize public resources and ensure that they reach as many beneficiaries as possible.
The program has been developed by the Micro, Small and Medium Enterprise Authority (Ampyme, for its acronym), with an initial capital of approximately fifteen million eight hundred two thousand six hundred sixty-four dollars (US$ 15,802,664.00).
Promotion of the FIDEMICRO program in cooperatives in Coclé, Herrera and Los Santos.
At the end of 2021, the fund has a portfolio of loans placed of more than twelve million US dollars (US$12,000,000.00), and total assets of approximately twenty million US dollars (US$20,000,000.00), which represents an increase of approximately forty-two percent (42%) in the fund’s total assets since its creation.
In order to classify this program as a success story, apart from analyzing the aforementioned numbers, we must take into account that the impact of these placements multiplies the benefits throughout the country.
In the last six months of the year, at least three tours have been made to different parts of the interior of the country to promote the Program, and important placements have been made in financial entities whose epicenter of operations allows them to reach rural and hard-to-reach areas. The clients of the financing entities participating in the Fidemicro Program are entrepreneurs, natural and legal persons, who use these funds to create or maximize a business that generates value, jobs and growth opportunities in the areas where they operate. This tendency contributes to include these entrepreneurs in the economic formality bringing as a consequence a long-term benefit of great magnitude for the country.
Another key point of this program is the financial soundness with which it is managed, and the adherence to risk and credit policies, which has allowed that at the end of 2021, in the midst of the coronavirus pandemic, the total delinquency of the portfolio does not exceed one percent (1%). As a country, we should be proud of this fact.
The main activities for which financing entities’ clients have requested financing are: Retail trade, transportation, handicrafts, services, and the agricultural sector.
One of the latest financial institutions to access the program is the Milk Producers Cooperative (COOLECHE, for its acronym in Spanish), one of the largest agricultural cooperatives in the country, which was approved for a total loan of one million US dollars (US$1,000,000.00), in order to provide its clients with a soft loan opportunity and resources to improve the productivity of their businesses. Most of COOLECHE’s associates are in the agricultural sector in rural areas.
Loan certification to Microserfin and Banco Delta.
The fund also has banking entities such as Banco Delta, CENTRAL EMPRESARIAL SOLIDARIA, S. A. and MICROSERFIN, which are leading microfinance institutions. Another strong entity participating in the program is Suma Financiera, S.A. Also within the broad spectrum of participating financial entities are other more regional ones such as COOPERATIVA SM CHARCO AZUL and Financiera Volcán in the province of Chiriqui, and COOPERATIVA DE SERVICIOS MÚLTIPLES NUEVA UNIÓN R.L. in the area of Azuero.
Icaza Trust Corporation (I.T.C.) as trustee of the Fidemicro Panama program has as its main goal to responsibly place all the available assets of the fund in the shortest time possible, trying to meet the social goal of the project which is to place a very considerable amount of the funds to entities that reach rural areas. One of the pillars of the program is to bring a light of hope and development to areas that are not usually served by traditional banking, and that by receiving financing for the development of their businesses achieve a direct impact on the Panamanian economy, helping to reduce the socio-economic gap in the country.
The Republic of Panama, by means of Law No. 52 of 2016 (“Law No. 52”), established the requirement that all legal entities (corporations, limited liability companies and private interest foundations) are required to keep accounting records and maintain supporting documentation for a minimum period of five (5) years.
Recently, the referred Law No. 52 was amended by means of Law No. 254 of November 11, 2021 (“Law 254”), establishing additional requirements regarding the “accounting records” to be kept by legal entities.
Below are some questions to help us explain the amendments to Law N° 52:
What is the main amendment to Law N° 52 introduced by Law N° 254?
It establishes the obligation that the accounting records to be kept and maintained by legal entities must be provided to the resident agent, for its custody, at the latest within four (4) months following the expiration of each fiscal year, i.e., no later than April 30 of each year. In other words, the accounting records as of December 31, 2021, must be delivered to us no later than April 30, 2022, and likewise at the expiration of the subsequent fiscal years.
The accounting records may be provided to the resident agent in original or copy and shall be kept by the resident agent in a confidential manner, unless they are required by a competent authority of the Republic of Panama, according to the applicable laws.
Where can the original accounting records be kept?
The original accounting records may be kept in the possession of the legal entity anywhere in the world or in Panama under the custody of the resident agent. If the original accounting records are kept in a place other than the offices of the resident agent, the legal entity is required to inform, annually and in writing, the resident agent of the name and contact data of the person who keeps the original accounting records and supporting documentation in his/her custody, as well as the physical address where they are kept.
What are accounting records according to Law N° 52?
Accounting records are understood as those that clearly and precisely indicate the operations, both accounting and financial, of the legal entity, its assets, liabilities and equity, as well as those that serve to determine its financial situation with reasonable accuracy at all times and allow the preparation of financial statements.
What kind of accounting records must legal entities keep?
A. Legal entities engaged exclusively in being holding companies for assets, such as real estate, shares, participation quotas, bank accounts and/or investment accounts, among others, must provide, as accounting records, a document containing the following information:
The information may be provided with the annual delivery to the resident agent of a balance sheet containing the amount of the assets, liabilities and income of the legal entity for the previous fiscal period.
B. Legal entities engaged in the purchase and sale of negotiable instruments and public or private securities, in order to profit from their resale or by any other means of market speculation, must deliver the following:
C. Legal entities that carry out commercial acts outside the Republic of Panama must deliver:
Which companies are exempted from providing accounting records or copies thereof to the resident agent?
The following legal entities are exempted from the obligation to provide the resident agent with the accounting records or a copy thereof on an annual basis:
What is supporting documentation under Law N° 52?
Supporting documentation is defined as that which includes contracts, invoices, receipts and/or any other documentation necessary to support transactions carried out by a legal entity.
What are the consequences for a legal entity in case of failure to provide the original or copy of the accounting records to the resident agent in a timely manner?
The resident agent must report such fact to the regulatory body and such non-compliance could result in: (i) fines to the legal entity of US$5,000.00 to US$1,000,000.00; (ii) the suspension of the corporate rights of the legal entity; and (iii) the inability to register any type of document in the Public Registry and to obtain certificates issued by such Registry. Furthermore, the resident agent is obliged to resign as such with respect to the legal entity who does not comply.
How long accounting records and supporting documentation must be maintained in the event of dissolution?
In case of dissolution, the accounting records and supporting documentation or their respective copies for the five (5) years prior to the registration of the dissolution must also be kept by the legal entity and be available for a minimum period of five (5) years from the registration of the dissolution. These documents must be provided to the Resident Agent in order to proceed with the dissolution procedures.
For any additional information or further assistance, you may require regarding accounting records requirements, please do not hesitate to contact us at the following e-mail address: accountingservices@icazalaw.com.