- What is a limited liability company?
The limited liability company is one of the commercial companies offered by Panamanian commercial legislation. As its main characteristic, when the limited liability company is constituted, it has its own legal status and assets, independent and separate from its partners. For this reason, the partners are not responsible for the obligations of the company, unless they owe money to the company for the subscription of their quotas.
- How is a limited liability company different from a corporation?
The main difference between a limited liability company and a corporation is that, in a limited liability company, the partners have a greater say in the structuring and administration of the company, while in a corporation the shareholders participate primarily as regards the capital of the corporation, and not so much in the administration of the corporation, as Juan Pablo Fábrega comments in his Panamanian Limited Liability Companies Law. Another important distinction is that, in the case of limited liability companies, the identity of its partners is public, as it is registered in the Public Registry of Panama, while the identity of the shareholders of a corporation is not, since it is only registered in the Sole Beneficial Owner Registry, whose access is not public.
- How is the capital of a limited liability company structured?
The capital of a limited liability company is structured as agreed by the subscribers of the articles of incorporation in said document. Law 4 of 2009, which regulates limited liability companies, is limited to requiring “the amount of the authorized share capital, which may be in any currency, the shares or quotas into which it is divided and the value of each one.” The holders of these participations or quotas are the partners, whose name, address and participation must also be detailed in the articles of incorporation. These can be natural or legal persons; for the purposes of this article, we will focus on partners who are natural persons.
It should be noted that, unlike the shares of a corporation, the quotas of a limited liability company are not transferred with the simple endorsement of a certificate; the partners must approve said transfer and the incorporation of the new partner into the company. This is consistent with the greater control that the partners have in this type of company compared to what happens with the shareholders of corporations. This highlights the more personal nature of a limited liability company, as far as its partners are concerned.
- What happens with the participation in a limited liability company of a partner who is a natural person and who has died?
Article 27 of Law 4 of 2009 states that “in the event of the death of a partner, the company may continue with or without their heirs, if so agreed in the articles of incorporation.” For Juan Pablo Fábrega, in his aforementioned work, this rule “presents a confusing and imprecise wording”; he does not recommend interpreting this article as if it imposes a condition: that the articles of incorporation expressly allow the company to continue with the heirs of the deceased partner. He favors a second interpretation in which the objective of this rule is simply to reaffirm the control that partners have over the admission of new partners to the company, regardless of who the heirs of the deceased partner are. In other words, if the partners do not want to incorporate the deceased partner’s heirs as partners, they can refuse to do so.
- Despite the fact that it is the partners who approve the incorporation of the heirs of a deceased partner as partners of the limited liability company, should probate for the deceased partner still be carried out?
Although it is the partners who approve the incorporation of the heirs of a deceased partner as partners of the limited liability company, it is still recommended to carry out probate to avoid possible claims. Probate could take place in Panama or abroad, wherever the deceased partner had his last address. Even if the partner did not have his last address in Panama, probate may be opened in Panama only for the purposes of their quotas in the limited liability company. Once probate is decided, the remaining partners of the limited liability company may decide to incorporate the heirs as partners, in proportion to the quotas that the deceased partner had.
- In practice, how are quotas in a limited liability company transferred from a deceased partner to their heirs?
In practice, the remaining partners of the limited liability company meet or resolve unanimously, in writing (if this form of decision-making is allowed by the company), to approve the transfer of the quotas of the deceased partner to their heirs, specifying the name, address and participation of the new partners. The minutes or consent containing these decisions is registered in the Public Registry of Panama. Subsequently, the limited liability company updates the register of partners and issues the corresponding participation certificates.
