Investors around the World prefer Panamanian corporations as a consequence of the key advantages they provide for investments. The Panamanian corporations represent a significant instrument frequently employed for modern commercial activities such as legal affairs, fiscal issues, insurance matters, etc.

Since the year 1927, the Republic of Panama has a special law regarding corporations. The Panamanian Company Law encompasses all the important aspects pertaining to this type of moral person, without making distinction amid the place were the company carries out its’ activities or amid the source of it’s income, this is to say, the Panamanian Law does not distinguish amongst “in-shore” and “off-shore” companies. Panama has been able to invigorate and to ameliorate the corporation Law throughout time by means of decrees and ordinances; managing to keep intact it’s simplicity. The Panamanian Company Law respects the principle of free will in private matters, and it is materialized in the Articles of Incorporation of each company.

The Panamanian fiscal system is based on the principle of territoriality, this is to say, every company, be it Panamanian or foreign, which carries out activities and/or obtains income from a Panamanian source is subject to every applicable fiscal regulation and to the payment of a fixed annual tax of US$300.00 dollars of the United States of America payable as of the year of its incorporation and of US$300.00 payable as of the second year of its incorporation. On the other hand, those companies which do not carry out activities within the Panamanian territory and which do not obtain income from a Panamanian source, are only subject to the payment of a fixed annual tax of US$300.00 dollars of the United States of America payable as of the year of its incorporation and of US$300.00 payable as of the second year of its incorporation.

It is important to point out that the fees and expenses arising from the incorporation of a Panamanian company and of its further continuation are economical and accessible to everyone and that the registration fees are determined according to the amount of its stock capital.

The Panamanian Company Law is simple and practical, enabling the uncomplicated constitution of a company, its administration and/or its modification. On an equal basis, the Law enables the redomiciliation of a company to or from Panama by means of a simple procedure.

Panama defends the client-attorney privilege as long as the issues arising from each particular case are in accordance with the Law, public order and with the good moral habits. The attorneys are obliged to know their clients and to dispose of sufficient mechanisms to identify them.

Two or more persons, from any nationality, with or without domicile in the Republic of Panama, may create a Panamanian corporation, for the accomplishment of any lawful objective, having to comply solely with the conditions required by the Law. It is important to mention that the constitution of a corporation is a commercial act, reason for which the persons who constitute it (“the subscribers of the Articles of Incorporation”) need to have full legal capacity and they shall be able to dispose liberally of their assets.
The Articles of Incorporation may be subscribed in the Republic of Panama or in any part of the world and said document may be prepared in any language.

The formalities required by the Panamanian Law for the incorporation of a corporation are:

• The name and address of the subscribers of the Articles of Incorporation.
• The name or identification of the company, which may not be identical to that of an existing company. This name may be expressed in any language and it shall always contain a word, phrase or abbreviation that indicates that a corporation is being created, for example: Corporation, Corp., Sociedad Anónima, S.A., Incorporated, Inc., A.G., etc. If the company is intended to carry out banking activities, insurance activities, to function as a trust or as a trustee, a word or phrase indicating the above mentioned activities needs to be added, for example: Bank, Banco, Insurance, Risk Management, etc.
• The objectives and purposes for which the company is created. The Law does not require an exhaustive enumeration of all the objectives and purposes pursued by the company. If the company is intended to carry out banking activities, insurance activities, to function as a trust or as a trustee, these activities have to be clearly mentioned in the Articles of Incorporation.
• The amount of the company’s authorized capital, the way in which it is to be divided and the value of the shares of stock to be emitted. The authorized capital may be expressed in any legal currency and the shares that compose it may have or may not have a nominal value. It is important to note that there is no obligation to disburse the capital in order to initiate with the activities of the company.
• The qualification of the shares of stock which integrate the company’s authorized capital (nominative, to the bearer or both), their different classes and categories if they exist and the special rights and obligations for each particular case.
• The amount of shares of stock each subscriber is engaged to subscribe.
• The domicile of the company. Normally the domicile indicated is that of the company’s Registered Agent, however, the company may celebrate its meetings and its assemblies in any part of the World.
• The duration of the company, that may be limited or unlimited.
• The number, name and domicile of the Directors and of the Officers. The Law requests the existence of at least three (3) Directors, which may be physical persons or legal entities, from any nationality and which need not be shareholders. The Officers shall also be at least three (3), this is to say: a President, a Secretary and a Treasurer, and one persona may hold various posts at the same time. A special signatory right (individually or joint) may exist as long as it is included in the Articles of Incorporation or in a document that needs to be registered in the Panama Public Registry.
• The name and domicile of the Registered Agent, which shall be an attorney or a law firm from the Republic of Panama.
• Any other lawful clause, which the shareholders or the subscribers desire.

Once all of the above mentioned formalities have been accomplished, the document has to be presented to a Notary Public of the Republic of Panama, who will prepare a Public Deed based on the document, which is afterwards registered in the Panama Public Registry. The corporation will deploy its effects in relation to third parties as of the moment of its registration in the Panama Public Registry.