Article 2.
Private foundations shall be governed by the foundation
charter and its regulations, as well as by the provisions
of this law and other legal or regulatory provisions
that may be applicable. The provisions of Title II of
Book I of the Civil Code shall not apply to these foundations.
Article 3.
Private foundations shall not be for profit. However,
they may carry out mercantile activities in a non-habitual
manner or exercise the rights deriving from titles representing
the capital of mercantile corporations that make up
the patrimony of the foundation, provided that the economic
results or proceeds of such activities be dedicated
exclusively for the purposes of the Foundation.
Article 4.
Private foundations may be constituted to become effective
at the time of constitution or after the death of its
founder, by anyone of the following methods:
a) Through a private document, executed by the founder,
whose signature must be authenticated by a notary public
at the place of constitution.
b) Directly before a notary public at the place of constitution.
Whichever may be the method of constitution, it must
comply with the formalities established in the present
Law, for the creation of foundations.
In case of a foundation being created either by public
or private document, to have effect after the death
of the founder, the formalities stipulated for the execution
of testaments shall not apply.
Article 5.
The foundation charter shall contain:
1. The name of the foundation, expressed in any language
with characters of the Latin alphabet, which shall not
be equal or similar to that of a foundation previously
existing in the Republic of Panama, 80 as to avoid confusion.
The name must include the word "foundation"
to distinguish it from other natural or juridical persons
of a different nature.
2. The initial patrimony of the foundation, expressed
in any currency of legal tender that in no case shall
be less to a sum equivalent ten thousand Balboas (B/10,000.00)
=U.S. Dollars .
3. A complete and clear designation, of the member or
members of the Foundation Council, to which the founder
may belong, including their addresses.
4. The domicile of the foundation.
5. The name and address of the Resident Agent of the
foundation in the Republic of Panama, which shall be
an attorney or a law firm, who must countersign the
foundation charter prior to its registration at the
Public Registry.
6. The purposes of the foundation.
7. The manner in which the beneficiaries of the foundation
shall be designated, among which the founder may be
included.
8. The reservation of the right to amend the foundation
charter whenever deemed convenient;
9. The duration of the foundation.
10. The destination to be given to the assets of the
foundation and the method of liquidation of its patrimony
in case of dissolution;
11. Any other lawful clause that the founder may deem
convenient.
Article 6.
The foundation charter, as well as any amendment thereto
must be written in any language with characters of the
Latin alphabet, and must comply with the regulations
for the registration of acts and titles in the Public
Registry; for which purpose it must be previously protocolized
by a notary public of the Republic (of Panama). If the
foundation charter or its amendments are not written
in the Spanish language, they must be protocolized together
with their (Spanish) translation by an authorized public
translator of the Republic of Panama.
Article 7.
Any amendment to the foundation charter, when permitted,
shall be carried out and executed in accordance with
what is established therein. The respective agreement,
resolution or act of amendment shall contain the date
on which it was carried out and the name, clearly identifiable,
of the person or persons subscribing it and their signatures
which shall be authenticated by a notary public of the
place where the document is executed.
Article 8.
Every private foundation must pay a registration fee
and an annual maintenance tax equivalent to those established
for corporations in Articles 318 and 318A of the Fiscal
Code. The procedure and method of payment, the surcharge
for late payment, the consequences for lack of payment
and all other complementary provisions of the aforementioned
legal principles, shall be applied to private foundations.
Article 9.
The registration at the Public Registry of the foundation
charter shall bestow upon the foundation juridical personality
without the need for any other legal or administrative
authorization. Besides, the registration at the Public
Registry constitutes a means of publicity before third
parties.
Consequently, the foundation may acquire and own assets
of any kind, incur obligations and be a party to any
type of administrative and judicial proceedings in accordance
with applicable legal provisions.
Article 10.
Once the foundation has obtained its juridical personality,
the founder or third parties that have pledged to contribute
assets to the foundation, on their own or at the request
of any person with interest in the foundation, shall
formalize the transfer to the foundation of the assets
so pledged. When the foundation is constituted to be
effective upon the demise of the founder, it shall be
deemed to have existed prior to such death, in respect
to the donations that he (she) may have made to the
foundation.
Article 11.
For all legal purposes, the assets of the foundation
shall constitute a separate patrimony from the personal
assets of the founder. Therefore they cannot be sequestered,
embargoed or subject to any precautionary action or
measure, except for obligations incurred, or for damages
caused by virtue of fulfilling the purposes and objectives
of the foundation, on behalf of the legitimate rights
of its beneficiaries. In no case shall the assets respond
for personal obligations of the founder or of the beneficiaries.
Article 12.
Foundations shall be irrevocable, except in the following
cases:
a) When the foundation charter has not been registered
at the Public Registry;
b) When the opposite is expressly established in the
foundation charter.
c) For any of the causes of revocation of donations.
The transfers (of assets) made to foundations shall
be irrevocable by whoever has made the transfer, unless
the opposite is expressly established in the act of
transfer.
Article 13.
In addition to the provisions of the previous article,
when the foundation has been created to be effective
after the demise of the founder, the latter shall have
the exclusive and unlimited right to revoke it.
The heirs of the founder shall not have the right to
revoke the creation or the transfers, even if the foundation
has not been registered in the Public Registry prior
to the demise of the founder.
Article 14.
The existence of legal provisions in inheritance matters
in the domicile of the founder or of its beneficiaries,
shall not be opposable to the foundation, nor shall
it affect its validity, or prevent the fulfilment of
its objectives as provided for in the foundation charter
or its regulations.
Article 15.
The creditors of the founder or of a third party shall
have the right to dispute the contributions or transfer
of assets in favour of a foundation, when the transfer
constitutes an act of fraud to the creditors. The rights
and actions of such creditors shall prescribe three
(3) years from the date of the contribution or transfer
of the assets to the foundation.
Article 16.
The patrimony of the foundation may originate from any
lawful business and may consist of present or future
assets of any nature. Periodic sums of money or other
assets may also be incorporated to the patrimony by
the founder or by third parties. The transfer of assets
to the patrimony of the foundation may be effected by
public or private document. Nevertheless, in the case
of real estate, the transfer must conform with the rules
for the transfer of real estate.
Article 17.
The foundation should have a Foundation Council, whose
duties or responsibilities shall be established in the
foundation charter or in its regulations. Unless it
be a juridical person, the number of members of the
Foundation Council hall not be less than three (3).
Article 18.
The Foundation Council shall be in charge of carrying
out the purposes or objectives of the Foundation. Unless
otherwise stated in the foundation charter or its regulations,
the Foundation Council shall have the following general
obligations and duties:
1. To administer the assets of the foundation, in accordance
with the foundation charter or its regulations.
2. Enter into acts, contracts or lawful businesses that
may be suitable or necessary to fulfil the object of
the foundation, and to include in such contracts, agreements
and other instruments or obligations, such clauses and
conditions as are necessary and convenient, which conform
to the purposes of the foundation and are not contrary
to the law, to morals, to bonus mores or to public order.
3. To inform the beneficiaries of the foundation of
the patrimonial situation of the latter, as established
in the foundation charter or its regulations.
4. To deliver to the beneficiaries of the foundation
the assets or resources set up in their favour by the
foundation charter or its regulations.
5. To carry out all such acts or contracts which are
permitted to the foundation by the present Law and other
applicable legal or regulatory provisions.
Article 19.
The foundation charter or its regulations may provide
that the members of the Foundation Council may only
exercise their powers by obtaining previous authorization
of a protector, a committee or any other supervisory
body, appointed by the founder or by the majority of
the founders. The members of the Foundation Council
shall not held liable for the 1088 or deterioration
of the assets of the foundation, nor for any damages
or prejudice caused, when said authorization has been
duly obtained.
Article 20.
Unless otherwise provided for in the foundation charter
or its regulations, the Foundation Council must render
an accounting of its activities to the beneficiaries
and, when applicable, to the supervisory body. If the
foundation charter or its regulations stipulate nothing
in this regards, the rendering of accounts must be done
annually. If the accounts 90 rendered are not objected
within the term established in the foundation charter
or its regulations, in lack of it, it shall be deemed
as having been approved within ninety (90) days from
the day it was received, for which purpose, record of
this term shall be made in the report rendering the
accounts.
Such period having lapsed or the account approved, the
members of the Foundation Council shall be exempted
from liability for their administration, unless they
had failed to act with the diligence of a bonus paterfamilias.
Such approval does not exonerate them before the beneficiaries
or third parties having an interest in the foundation,
for damages caused due to gross negligence or fraud
in the administration of the foundation.
Article 21.
In the foundation charter the founder may reserve for
himself/herself or for other persons, the right to remove
the members of the foundation Council, as well as to
appoint or add new members.
Article 22.
When the foundation charter or its regulations do not
establish anything in respect to the right to and the
causes for removal of the members of the Foundation
Council, these may be judicially removed, through summary
proceedings, for the following causes:
1. When their interests are incompatible with the interests
of the beneficiaries or the founder.
2. If the administration of the assets of the foundation
lacked the diligence of a bonus paterfamilias.
3. If they are convicted for a crime against private
property or public faith. In this case, while the criminal
proceedings are in progress, the temporary suspension
of the member on trial may be decreed.
4. For incapacity or impossibility to carry out the
objectives of the foundation, from the time such causes
may arise.
5. For insolvency or bankruptcy proceedings.
Article 23.
The founder and beneficiary or beneficiaries may request
the judicial removal of the members of the Foundation
Council. Should the beneficiaries be disabled or under
age they may be represented by whoever exercise upon
them the "patria potestas" or guardianship,
as the case may be.
The judgement of the court decreeing the removal, shall
appoint new members in replacement of the previous ones,
who shall be persons with sufficient capacity, competence
and good moral standing to administer the assets of
the foundation, in accordance with the purposes established
by the founder.
Article 24.
The foundation charter or its regulations may provide
for the constitution of supervisory bodies, that may
be constituted by natural or juridical persons, such
as auditors, protectors of the foundation or others.
The duties of the supervisory bodies shall be established
in the foundation charter or its regulations and may
include, among others, the following:
1. To ensure the fulfilment of the purposes of the foundation
by the Foundation Council and (to protect) the rights
and interests of the beneficiaries;
2. To demand from the Foundation Council, the rendering
of accounts;
3. To modify the purposes and objectives of the foundation,
if and when they become too costly or impossible to
fulfil.
4. To appoint new members of the Foundation Council
due to temporary or permanent absence or for expiration
of the period of anyone of them.
5. To appoint new members of the Foundation Council
in cases of temporary or accidental absence of anyone
of them.
6. To increase the number of members of the Foundation
Council.
7. To approve the acts adopted by the Foundation Council,
as indicated in the foundation charter or its regulations.
8. To guard the assets of the foundation and observe
their application to the uses or purposes stated in
the foundation charter.
9. To exclude beneficiaries of the foundation and to
add others in accordance with the provisions of the
foundation charter or its regulations.
Article 25.
The foundation shall be dissolved due to:
1. Reaching the day in which the foundation must terminate,
in accordance with the foundation charter.
2. The fulfilment of the purposes for which it was constituted
or if their fulfilment becomes impossible.
3. Being in a state of insolvency, cessation of payments
or due to bankruptcy proceedings having been declared
judicially.
4. The loss or total extinction of the assets of the
foundation.
5. Its revocation.
6. Any other cause established in the foundation charter
or in the present Law.
Article 26.
Every beneficiary of the foundation may contest any
acts of the foundation that may damage the rights conferred
upon him/her, denouncing such circumstance to the protector
or to other supervisory bodies, if any; or lacking them,
directly promoting the respective judicial claim, before
a competent court of the domicile of the foundation.
Article 27.
The acts of constitution, amendment or extinction of
the foundation, as well as the acts of transfer, transmittal
or encumbrance of the assets of the foundation and the
income derived from such assets or any other act in
connection therewith, shall be exempt from all taxes,
contributions, duties, liens or assessments of any kind
or denomination, provided that such assets are:
1. Assets located abroad.
2. Money deposited by natural or juridical persons whose
income is not derived from Panamanian sources nor taxable
in Panama for any reason whatsoever.
3. Shares or securities of any kind, issued by corporations
which income is not derived from Panamanian sources
or when such income is not taxable for any reason whatsoever,
even when such shares or securities be deposited in
the Republic of Panama.
The acts of transfer of real estate, titles, certificates
of deposit, securities, money or shares, carried out
in fulfilment of the purposes or objectives, or for
the extinction of the foundation, in favour of relatives
within the first grade of consanguinity and of the spouse
of the founder, shall also be exempted from all taxes.
Article 28.
Foundations constituted in accordance with a foreign
law may become subject to the provisions of this law.
Article 29.
Foundations referred to in the previous article that
opt to become subject to the provisions of this Law,
shall present a Certificate of Continuation, issued
by such bodies as their internal regime may call for,
and which shall contain:
1. The name of the foundation and the date of its constitution.
2. Data about its registration or deposit (of the charter)
at its country of origin.
3. An express declaration of its desire to continue
its legal existence as a Panamanian foundation.
4. Requirements stipulated under Article 5 of this Law,
for the constitution of private foundations.
Article 30.
The certification containing the resolution of continuation
and other requirements mentioned in the preceding paragraph
must have the following documents attached there to:
1. Copy of the original act of constitution of the foundation
expressing its desire to continue in Panama, along with
any subsequent amendment;
2. A power of attorney granted to a Panamanian attorney
to carry out the necessary proceedings to make effective
the continuation of the foundation in Panama.
The certificate of continuation, as well as the documents
attached thereto referred to in this Law, shall be duly
protocolized and registered at the Public Registry so
that the foundation may continue its legal existence
as a private foundation in the Republic of Panama.
Article 31.
In the cases foreseen in Article 26, the responsibilities,
duties and rights of the foundation acquired prior to
the change or domicile or legislation, shall continue
in force, as well as the proceedings already initiated
against it or those that the foundation may have promoted,
without being affected such rights and obligations due
to the change authorized by the aforesaid legal provisions.
Article 32.
The foundations constituted in accordance with this
Law, as well as the assets comprising its patrimony,
may be transferred or become subject to the laws and
jurisdiction of another country, as may be provided
by the foundation charter or its regulations.
Article 33.
Registrations related to private foundations shall be
effected at the Public Registry in a special section
that shall be named "Section of Private Foundations"
The Executive Branch through the Ministry of Government
and Justice shall issue the regulations applicable to
such section.
Article 34.
To avoid the unlawful use of private foundation, all
legal provisions contained in Executive Decree No. 468
of 1994 and any other rule in force aiming at fighting
money laundering derived from drug-trafficking, shall
apply for their operation.
Article 35.
The members of the Foundation Council, of the supervisory
bodies, if any, as well as the public or private employees
who might have any knowledge of the activities, transactions
or operations of the foundations shall at all times
maintain secrecy and confidentiality in this respect.
Infringement of this shall be penalized with six (6)
months imprisonment and a $50,000.00 fine without prejudice
of the corresponding civil liability.
The provisions of this article shall apply without prejudice
of the information which must be disclosed to the official
authorities and of the inspections that they must carry
out in the manner established by the law.
Article 36.
Any controversy for which there is no special procedure
in this Law, shall be resolved through summary proceedings.
The foundation charter or the regulations of the foundation
may establish that any controversy arising in respect
to the foundation shall be resolved by arbiters or arbitrators,
as well as establish the procedure they should abide
by. In the event that such procedure is not established,
the rules in respect to such matters, as contained in
the Judicial Code, shall apply.
Article 37.
This law shall be effective from the date of its publication.
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