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8Recommend Legalinfo-Panama!

The formation and operation of
Panamanian Corporations
(Part II)

CORPORATE MANAGEMENT STRUCTURE

A. Shareholders

Generally speaking, the management of the affairs of a corporation is vested in the board of directors, and shareholders are attributed few administrative functions per se.

However, under Panamanian Law, the shareholders constitute the supreme power of the corporation, and shareholder action is required in connection with (a) amendments to the Articles of Incorporation; (b) removal of directors; (c) if so provided by the Articles of Incorporation or by-laws adopted by the shareholders, the adoption, amendment and repeal of By-Laws; (d) extraordinary corporate matters such as the sale, lease, exchange or disposal of capital assets, including its clientele and privileges, franchises and rights; (e) if so provided by the Articles of Incorporation, the transfer of assets in trust or to pledge or mortgage them to guarantee the liabilities of the corporation or third parties; (f) agreements for the merger or dissolution of the corporation.

However, other than the above and in absence of provisions to that effect in the Articles of Incorporation or the By-Laws, there are no particular requirements for the holding of a shareholders' meeting.

In absence of a provision in the Articles of Incorporation or By-Laws, shareholders' meetings must be held within the Republic of Panama. Written notice of time, place and purpose is required to be given to call a meeting of the shareholders of a corporation. Said notice is given in the name of the President, Vice-President, Secretary or Assistant Secretary, or of any person or persons authorized for this purpose by the Articles of Incorporation or By-Laws. Notice of the meeting must be given in the manner contemplated by the Articles of Incorporation or By-Laws, and in default thereof, notice must be given personally or mailed not less than 10 days nor more than 60 days prior to the date of the meeting to the shareholders' registered address; and in the case of bearer shares, by publication in accordance with the provisions of the Articles of Incorporation or the By-Laws.

Shareholders, or their legal representatives, may waive notice of any meeting in writing, and the attendance of all the shareholders at a meeting thereof will operate as an automatic waiver of notice of the meeting.

Under Panamanian Law, resolutions adopted in any meeting in which all shareholders are present, whether personally or by proxy, are valid; and resolutions adopted in a meeting in which there is a quorum, having those shareholders who are absent waived notice, will be valid for all purposes enumerated in the waiver. The quorum requirements for shareholder meetings may be determined by the Articles of Incorporation, and in default thereof, the presence of the majority of the shareholders will constitute a quorum. If a quorum is present, the majority vote of the shares represented will be sufficient to constitute a valid resolution of the shareholders, unless otherwise provided by law or a provision to that effect in the Articles of Incorporation.

Furthermore, unless restricted by the Articles of Incorporation shareholders have the right to be represented by a proxy holder at all shareholders' meetings, who may be appointed by private or public instrument, with or without power to substitute, and who need not be a shareholder of the corporation.

Lastly, the Articles of Incorporation may provide for cumulative voting for the elections of members to the board of directors.

 

B. Board of directors

Under Panamanian Law, the management and administration of a corporation is vested in a board of directors, composed of at least three natural persons of full age, and subject to that which is prescribed by law and provisions to that effect in the Articles of Incorporation. The board of directors has absolute control and management of corporate affairs, including the adoption, amendment and repeal of By-Laws.

A quorum for board of directors' meetings, in absence of a provision to that effect in the Articles of Incorporation, is constituted by the presence of a majority of the members of the board of directors and the resolutions of the majority of directors present at a meeting in which there is the required quorum, are considered as resolutions of the board of directors.

In addition, directors may be removed at any time by the votes, given to that effect, of the holders of the majority of the subscribed shares with voting rights in the election of directors.

In absence of a provision to the contrary in the Articles of Incorporation, it is not necessary that the members of the board of directors be shareholders. Additionally, if expressly authorized by the Articles of Incorporation, it is possible for directors to be represented at meetings of the board of directors through proxy holders, who need not be directors, and who must be appointed by public or private instrument, with or without power to substitute.

 

C. Officers

Under Panamanian Law, corporations must have at least a President, a Secretary and a Treasurer, who are elected by the board of directors, and in addition, may have all the officers, agents and representatives determined by the board of directors, the Articles of Incorporation or the By-Laws, and who are to be elected in the manner established therein, and all of whom may be replaced at any time by resolution adopted by the majority of the members of the Board of Directors at a meeting thereof, or in any other manner set forth in the Articles of Incorporation or the By-Laws.

If so provided by the Articles of Incorporation or the By-Laws, the same person may hold two or more offices, although it is recommended that the President and Secretary be two different persons. Furthermore, in absence of a provision to the contrary in the Articles of Incorporation or the By-Laws, it is not necessary that a person be a member of the Board of Directors or Shareholder to be an officer of the corporation.

AMENDMENTS TO THE ARTICLES OF INCORPORATION

The Articles of Incorporation may be amended in the same form established for the execution of the Articles of Incorporation, including the registration thereof at the Public Registry office. Any amendments agreed prior to the issuance of shares shall be authorized by the incorporators and by all who have agreed to subscribe shares of stock. Upon issuance of shares, any amendments to the Articles of Incorporation shall be subscribed by either (a) the holders, or their voting rights, or (b) pursuant to a resolution adopted by the holders, or their representatives, of the majority of the shares referred to above.

PROCEDURE AFTER INCORPORATION

A. Corporate records and bookkeeping

A Panamanian corporation which does not operate in Panama is not required to file any financial reports or tax returns and may maintain its books of account in any manner it desires in any part of the world.

Panamanian corporations operating in Panama are required to file Income Tax Returns. No other financial reports, with the possible exception of certain statistical reports which may be requested by various government offices, and a municipal tax declaration are required.

All Panamanian corporations are required by law to have a Minute Book, in which the minutes of all meetings of shareholders and/or directors should be transcribed in chronological order, and a Stock Registry which should contain the data relating to the ownership and issuance of share certificates. If shares are issued in bearer form, an entry to that effect should be inserted upon the original issuance thereof.

Panamanian corporations which do business in Panama are required to have, as well, a Journal, a General Ledger and a Book of Inventories and Balances and to keep them pursuant to generally accepted accounting practices in Panama.

All corporate and accounting books must be bound and sealed by the proper authority in Panama.

 

B. Corporate resolutions

Under Panamanian Law, the resolutions or actions of either the Board of Directors or the Shareholders of the corporation should be recorded in the Minutes Book of the corporation.

Under certain circumstances, actions taken by either the Board of Directors or the Shareholders of the corporation will have to appear on record at the Public Registry. These circumstances are as follows:

w All amendments to the Articles of Incorporation or to the By-Laws, if these have been adopted and registered;

w Any changes in the composition of either the Board of Directors or officers of the corporation;

w Agreements to merge or dissolve the corporation.

Decree No. 130 of 1984 establishes the documentary requirements to be observed in respect of such acts or resolutions which should be registered, to wit:

1. The original, or a complete copy of the minutes, certified by the person who has acted as the secretary of the meeting or has presided over it;

2. A textual extract of the minutes, or a certificate of the resolution or adopted agreements whose recording is desired. The extract or certification must at least contain the following data:

w The date during which the meeting was held.

w The name of the person who presided over the meeting and the person who served as secretary, and, if they were not the President and Secretary of the company, respectively, a statement of justification why other persons acted as such;

w If it is a shareholder's meeting, the number of shares represented and its relation with the amount of outstanding stock or that the total number of outstanding shares was represented;

w If it is a board of directors' meeting, the name of all the directors present personally or by proxy;

w The form in which notice was given or the reason why it was not given, be it by waiver of notice of the persons who were entitled to receive notice, or by (all) the shareholders or directors being present, and having agreed to hold the meeting;

3. The documents referred to must be certified by the person who acted as secretary of the meeting or by who presided over it.

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This information has been provided by Patton, Moreno & Asvat

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