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Panama's New
Securities Law in a Nutshell

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Pursuant to the Law-Decree, the following securities are subject to registration with the Commission:

  1. securities that are the subject of a public offering, subject to the approval of CNV;

  2. shares of issuers domiciled in Panama that, on the last day of the fiscal year, have fifty or more shareholders domiciled in Panama that are the "effective owners"5 of no less than 10% of the paid in capital of said issuer (excluding for the estimate affiliates and employees, directors and officers thereof).

  3. securities listed in any Panamanian Stock Exchange.

The interested party shall file a registration request through a qualified lawyer, that consists in two parts: the first shall contain the information that should be evident in the prospectus (including the financial data), and the second, shall contain the information and the documents that should be evident in the Files of CNV, such as material contracts, incorporation documents, etc.

Each securities offering is the subject of a separate registration request; however, the CNV may authorize the offer of different types of securities from the same issuer in a prospectus if this is allowed by the circumstances and if this does not create confusion among investors.

Registered issuers are obliged to file at the CNV interim reports and audited financial statements, as determined by this government agency.

Foreign issuers may register their securities before the CNV and their public offerings would not imply per se the conduct of business in Panama. Foreign issuers are obliged to maintain in Panama an attorney-in-fact in order to represent them before the Panamanian authorities, including judicial authorities and the CNV.

On the other hand, the Law regulates in detail the public offering or sale of securities made by issuers (or affiliated persons) in Panama. These offerings/sales are required to be registered before the Commission unless there is an exemption available. Under the Law, is deemed as an offer done in Panama, any offer made to persons domiciled in Panama, regardless that the same is done from the Republic of Panama or abroad, unless the CNV determines otherwise6.

The Law-Decree establishes the following offerings or sales as exempted from registration:

  1. The offer and sale of exempted securities (bonds issued or guaranteed by the State or by international organizations where the State participates or any securities exempted by determination of the Commission).

  2. Private placements: offers made by an issuer (or any of its affiliate) or an offeror in its name, to no more than 25 persons and which jointly results in the sale of said securities to no more than 10 persons, within a 1 year term.

  3. Offers and sales made to institutional investors7.

  4. Offers, sales, distributions, transfer and exchange of securities between the issuer and securities holders of said issuer due to:

    1. the offer of shares to increase the issuer’s capital, directed to existing shareholders;

    2. the issuer’s declaration of stock dividends or other securities of;

    3. issuer’s restructuring, dissolution, liquidation, merger or consolidation;

    4. the exercise of rights or options previously granted by the issuer.

  5. he offer and sale made by the issuer, exclusively to its employees, directors, and officers or to employees, directors, and officers of affiliated companies.

  6. any other offers or sales or transactions in securities that are exempted as per a ruling from the CNV.

The issuer interested in the public offering of its securities shall cause a securities registry application/filing.

Prior to the date of the approval from the CNV, which authorizes the public offering, the issuer may not negotiate the securities subject to the offering8. As from the filing date of the registration statement9, the issuer may offer securities to sales agents and the latter, the issuer and the existing subscribers may request purchase orders, provided that these activities do not constitute a firm obligation to purchase or sell said securities. After the public offering has been authorized, offers may be made in any manner, provided that they are accompanied by the final/statutory prospectus authorized by the CNV.

On the other hand, Title VIII of the Law-Decree establishes the obligation to notify the CNV of any tender offer from an issuer for more than 25% or more of the issued and outstanding stock of said issuer or for an amount of shares that causes the purchase thereof to imply the acquisition by the offeror of the same of over 50% of the issuer’s issued and outstanding stock. Said notice shall also be delivered to the issuer and the stock exchanges in Panama, where the shares subject to the tender offer are listed10.

Public offerings for the acquisition of shares shall have a term no less than 30 days, as from the date of the offer and shall occur under equal conditions for all holders of the shares subject to the offer. In the same manner the offer may be revoked, provided that the term of the offer has not expired. The contents of the notice of the offer and the replies shall be ruled by the CNV11.

The Commission may recognize the validity of registration statements declared effective by foreign "recognized jurisdictions" and therefore allow the public offering and listing in a local exchange of the securities covered by such registrations12.

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5. The persons directly or indirectly entitled to the economic benefits of the security, to exercise voting power or to dispose of the security.
6. The CNV has powers to qualify whether an e-offering is effected in Panama and, therefore, pursuant to registration, unless there is an exemption available.
7. Although the Law-Decree has no definition for this term, the exemption provision establishes that these are persons whose experience, knowledge, sophistication and financial net worth allow them to examine and assume the risks of investing in securities without the need of the protection of the law. This matter is subject to regulation from the Commission.
8. The violation of this prohibition is generally known as "gun-jumping".
9. The "waiting period".
10. Title VII in turn provides for notice to the Commission of proxy solicitations. See CNV Regulation 16-00 of 2000.
11. See CNV Regulation 04-00 of 2000, modified by Regulation 09-00 of 2000.
12. A recognized jurisdiction is the one which has laws and regulations in force which provide with similar or better legal standards for investors protection. Up to this date among the jurisdictions recognized by the CNV are the ones participating in IOSCO (i.e., US, France, Spain, UK, Japan, Switzerland, Germany, Hong Kong, Australia, Mexico, Italy, the Netherlands, Quebec and Ontario [Canada]).