Administrators Obligations related to documents of the administration of a Horizontal Property

Ricardo CeballosBy: 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.

Directors’ Liability in the Management of a Panamanian Corporation

Mariano Oteiza Jr

By: Mariano Oteiza Díaz

 

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:

  • To declare dividends of the corporation;
  • To authorize the issuance and repurchase of shares;
  • To adopt and amend the Bylaws;
  • To borrow money and issue debt instruments;
  • To appoint and remove the Officers of the corporation;
  • To approve all types of agreements and contracts;
  • To approve the sale and encumbrances on the assets of the corporation;
  • To delegate its authority and issue powers of attorney.

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:

  1.  False capitalizations, i.e., of the effectiveness of the payments that appear to have been made by the shareholders;
  2.  For the lack of funds for the payment of dividends declared by the Board of Directors;
  3.  For the proper management of the corporation’s accounting;
  4.  In general, for the execution or poor performance of its mandate;
  5.  For the commission of acts that go against the provisions of the Charter of Incorporation, resolutions adopted by the shareholders, the bylaws of the corporation or the laws in general.

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.