The Panamanian Government has enacted Law number 52 dated October 27th 2016 (hereinafter identified as “Law 52”), requiring companies and private interest foundations; that do not carry out operations to be executed or that will not have effects in the Republic of Panama, to keep accounting records and maintain supporting documentation confirming their operation and activities as of January 1st 2017.
This legislation defines the “accounting records” as the information that clearly and precisely states the legal entities’ commercial operations, assets, liabilities and their patrimony, allowing the validation of their financial status as well as the preparation of financial statements for said legal entities.
The “supporting documentation” confirming their operation and activities include the contracts, titles, statements of account, invoices, receipts or any other document that validates the transactions and operations executed by a legal entity.
The accounting records and support documentation must be kept and be available in the legal entity’s file for a period of five (5) years, counted as of the last day of the calendar year on which the transactions or operations were executed or as of the last day of the calendar year on which the legal entity ceases its operations.
The accounting records and supporting documentation may be kept at the legal entity’s Registered Agent’s office in the Republic of Panama or in any other place deemed advisable by its corporate organs be it in the Republic of Panama or abroad.
In those cases where these documents are kept in places other than the Registered Agent’s office, the legal entities are obliged to provide the following information in writing to their Registered Agent:
- The physical address where the accounting records and support documentation are kept.
- The name and contact information of the person in charge of keeping these documents in custody.
The legal entities must confirm their Registered Agent in writing any change of address, of the contact person or contact details concerning their accounting records and support documentation, within a period of fifteen (15) labor days, counted as of the date on which these changes were approved.
If the legal entity maintains its accounting records and support documentation outside of the Republic of Panama, it is obliged to provide them to its Registered Agent following the request received from a competent authority in the Republic of Panama, within a period of fifteen (15) working days, counted as of the date on which the request of this information is notified to the Registered Agent.
In the case of legal entities that do not carry out commercial activities and are exclusively dedicated to being asset holders (whatever their nature), they must provide information indicating the value of the assets they hold and the income received from said assets when required by the competent authority.
In the case of legal entities that perform commercial activities outside of Panama, they must provide the Journal and the General Ledger when required by the competent authority. An exception shall be made in the case of legal persons engaged in the purchase and sale of debt and commercial securities of a public nature, or issued by the Government or Municipalities, as well as private, or issued by individuals or commercial companies, to profit in their resale or by any other means of commercial speculation; in that case, the custodian’s statement or balance sheet of the company will suffice instead of the Journal and General Ledger
In the event that the legal entity does not provide the accounting records and the support documentation to the Registered Agent within the above mentioned period, the Registered Agent is obliged to resign and stop acting as the entity’s Registered Agent.
Likewise, Law 52 states that corporate rights will be suspended for the legal entity that fails to appoint a resident agent for a period greater than ninety (90) calendar days, after the resignation, removal or termination of its former resident agent.
Failure to comply with these provisions by the legal entity will be sanctioned with a fine of US $ 1,000.00 plus US $ 100.00 (legal currency of the United States of America) per day, from the time of the breach until it is rectified.
The accounting records and supporting documentation will be kept by the resident agent or the legal entity in strict confidentiality, so they will not be considered as public information; must be delivered exclusively to the Panamanian competent authority upon formal request to the resident agent.
It is noteworthy that this requirement does not affect the operations of companies or private interest foundations, nor the way in which they are used. It limits itself to extending to these legal entities the fulfillment of a formality of the legal entities, by their nature
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