Panama Private Interest Foundation Components
A Panama Private Interest Foundation may be created via a private or public instrument, by either an individual(s) or corporate entity/entities (the Founders). It is essential that there is an allocation or endowment of funds or assets by the Founder. This must meet the minimum satutory requirement, but need not be paid up at the time of creation of the Foundation (key difference with a trust which must have a transfer of assets to the trustee before it is valid). The Foundation becomes a corporate body by registering the Foundation Charter at the Public Registry.
This Foundation Charter contains, at a minimum, the following information:
Foundation Charter
- Its name, which must include the word "Foundation" (in any language)
- Its domicile (which may be anywhere but it is suggested that this either remain in Panama or at least in another civil law jurisdiction)
- The initial capital/estate (expressed in any currency) which cannot be less than the equivalent of US$10,000.00
- The name(s) and addressof the Member(s) of the Foundation Council which administers the estate (they can be individuals or corporate entities)
- The name and domicile of the Foundation's Resident Agent in Panama (which must be a lawyer or law firm)
- The objectives and goals of the Foundation (these must be possible, reasonable, moral, and legal)
- The manner in which the Beneficiaries (which may include the Founder), are selected
- Reservation of the right to modify the Foundation Charter
- The duration of the Foundation
- The use to be made of the Foundation's assets and the manner in which its estate is to be liquidated in the event of dissolution
Letter of Wishes
The Letter of Wishes is a letter written by the Founder or Protector which specifies exactly how the assets of the Panama Private Foundation are to be distributed upon a triggering event such as the death or incapacity of the Protector. The letter should state how the affairs of the foundation are to be administered upon this triggering event as well. This may include whether or not the Foundation will continue to exist, who to appoint as Protector or whether to dissolve the Foundation upon this event. Any beneficiaries of the foundation may also be listed in the Letter or Wishes.
The Letter of Wishes is an informal document which may be changed at any point by the author (the Founder or Protector). This Letter of Wishes may be held in private or it may be publicly filed such as the Foundation Charter. Most choose wisely to maintain this document in private in order to protect the identity of the Protector and the Beneficiaries.
Foundation By-Laws/Regulations
Unless specified in the Charter, a Panama Foundation does not need to have By-Laws or Regulations at all so long as a Letter of Wishes has been drafted. The Letter of Wishes is sufficient for expressing the testamentary wishes of the Founder. If By-Laws/Regulations are drafted, they generally detail the same items specified in a Letter of Wishes, only in a more structured, prescribed format. They will also specify what is to happen with the Foundation upon a triggering event, the beneficiaries of the foundation, etc. Similar to the Letter of Wishes, most people prefer to keep the content of the By-Laws or Regulations private so that the Protector and Beneficiaries may remain anonymous.
Founder
The Founder is the person or entity that establishes the Foundation in the Public Registry of Panama. This is generally the law firm that establishes the Foundation. The Founder has no influence over the control of the Foundation and is only recognized as the individual or company who presented the Foundation Charter to the public registry when the entity was originally registered.
Foundation Council
The Foundation Council serves a similar purpose to a company board of directors. It must contain a minimum of 3 individuals and/or a minimum of one corporate body and may be of any nationality residing/domiciled in any country. It is generally recommended that these are nominees since the names and addresses are publicly available. Sterling Offshore can provide the members of the foundation council in order to ensure the privacy and confidentiality of the client. Should the client choose to appoint the Foundation Council members, it is advised that these not be members of the family or any other potential beneficiary of the foundation.
The Foundation Council is charged with each of the following duties:
- To manage the assets of the Panama Foundation in accordance with the Foundation Charter and its By-Laws/Regulations (if applicable).
- To carry out those acts, contracts or business as may be expedient or necessary to fulfill the purpose of the foundation and to include in such contracts, and agreements or obligations, such clauses and conditions as are necessary and expedient, being consistent with the foundation's purposes and not contrary to law, morality, good manners or public order.
- To inform the beneficiaries of the foundation about its economic situation if provided by the Foundation Charter or its By-Laws/Regulations.
- To hand over to the beneficiaries of the foundation the assets or resources settled in their favor in the Foundation Charter or its By-Laws/Regulations.
- To carry out those acts or contracts which the foundation, according to the Panama Private Foundations Law and other applicable legal or regulatory provisions, may be permitted to carry out.
Protector or Guardian
The Panama Private Foundation may have a "supervisory body, usually referred to as a “Protector” of the foundation. Depending on the Charter and Regulations, this position can be appointed by the Founder or by the Foundation Council at the time of creation or at a later date. The Protector of the private foundation may be any individual or juridical entity (company, foundation, trust, etc.) and may remain secret. The Protector is not required and the client may choose not to anoint a Protector at all.
The powers of the Protector are specified in a “Private Protectorate Agreement” and may be very broad or narrowly defined depending on the wishes of the Founder or the Foundation Council. It is common for the Protector to have a supervisory role over the Foundation Council including:
- Powers to confirm decisions of the Foundation Council
- Suggest the manner in which beneficiaries should be chosen
- Suggest the manner in which the Foundation Council should conduct its affairs
- Full power of removal and replacement of the Foundation Council
The Protector may resign or assign its role to a new Protector at any time. It is also possible to use a nominee Protector.
Beneficiaries
Unlike a corporation which issues shares to owners, the Panama Private Interest Foundation has no shareholders and has no owners. Instead it has beneficiaries. The beneficiaries may be named by the Foundation Council or even directly by the Protector depending on the exact structure of the Foundation itself. The beneficiaries may be named via a Letter of Wishes from the Founder or Protector or in the Foundation Regulations/By-Laws.
Beneficiaries of a Panama Foundation typically have very limited rights regarding knowledge of the foundation activities or even of the fact that they are beneficiaries in many cases. The Protector or Foundation Council are typically able to remove beneficiaries and name new beneficiaries as well. This being the case, any listed beneficiaries (if there are any at all) are obviously not “beneficial owners” of the foundation. In fact, it is entirely possible to establish an offshore private foundation with a specific purpose and no named beneficiaries.