Private Interest Foundation
A legal entity constituted by one or more natural or legal persons, whose assets must be destined exclusively to the objectives or purposes expressly set forth in the founding charter. The initial patrimony may be increased by the creator of the foundation (founder), or by any other person.
Private interest foundations are governed by the foundation charter and its regulations, as well as by the provisions of Law 25 of 1995 and other applicable legal or regulatory provisions. The precepts of Title II of Book I of the Civil Code (of legal persons) do not apply to these foundations.
Private interest foundations may not pursue profit-making purposes (not to be confused with non-profit organizations). However, they may carry out commercial activities on a non-habitual basis, or exercise the rights arising from the securities representing the capital of commercial companies that are part of the assets of the foundation, provided that the economic result or product of such activities is exclusively dedicated to the purposes of the foundation.
What are the formalities to constitute a Private Interest Foundation?
Private interest foundations may be constituted to take effect, from the moment of their creation or after the death of their founder, by any of the following methods:
1) By means of a private document subscribed by the founder, whose signature must be authenticated by notary public of the place of its incorporation.
2) Directly before a notary public of the place of its incorporation.
In case the foundation is created, whether by public or private document, in order for it to take effect after the death of the founder, the formalities foreseen for the granting of the will are not required.
The founding act must contain:
- The name of the foundation, expressed in any language with characters of the Latin alphabet, which must not be the same or similar to that of another pre-existing foundation in the Republic of Panama, so that it does not lend itself to confusion. The name must include the word foundation to distinguish it from other natural or juridical persons of another nature.
- The initial patrimony of the foundation, expressed in any legal tender, which in no case shall be less than a sum equivalent to 10,000 balboas.
- The designation, in complete and clear form, including the address of the member or members of the Foundation Council, to which the founder may belong.
- The domicile of the foundation.
- The name and domicile of the resident agent of the foundation in the Republic of Panama, who must be a lawyer, or a law firm, who must countersign the foundational act, before its inscription in the Public Registry.
- The purposes of the foundation.
- The manner of designating the beneficiaries of the foundation, among which the founder may be included.
- The reservation of the right to modify the foundational act when deemed convenient.
- The duration of the foundation.
- The destination to be given to the assets of the foundation and the form of liquidation of its patrimony, in case of dissolution.
- Any other lawful clause that the founder considers convenient.
- The modifications to the foundational act, when permitted, must be made and signed in accordance with what is established therein. The respective agreement, resolution or act of modification must contain the date on which it was made, the clearly identifiable name of the person or persons who sign it and the signatures, which must be authenticated by a notary public of the place where the document is signed. As can be observed, the identity of the beneficiaries of the foundation is not included in the constitutional act, but simply the manner of designating such beneficiaries must be clearly established.
How is the Private Interest Foundation registered and recorded?
The foundational act is notarized by public deed and must be submitted for registration in the Private Interest Foundations section of the Public Registry of Panama.
The registration of the foundational act in the Public Registry grants the foundation legal personality without the need of any other legal or administrative authorization. The inscription in the Public Registry also constitutes a means of publicity before third parties.
