Private Interest Foundations are intended to promote national and international trade, the Panamanian legal system has included legal mechanisms regarding corporations and private interest foundations.
These laws address aspects related to the acquisition of goods, confidentiality and tax benefits for corporations depending on their activity.
Each legal entity operates under different procedures. Corporations operate in accordance with the provisions of Law No. 32 of February 26, 1927, while corporations operate under the provisions of Law No. 25 of June 12, 1995.
A private interest foundation can be defined as a legal entity whereby a founder transfers his property to a legal entity (a foundation) to protect and manage it in favor of a beneficiary like himself or a third person.
Unlike other legal entities, such as corporations and trusts, foundations do not have shareholders or partners and do not require transferring assets to a third party since the interested party can set up its own private foundation.
Private interest foundations are non-profit entities, but they may carry out non-usual commercial activities related to their objectives in accordance with the provisions of its own articles of incorporation.
Private Interest Foundations shouldn’t be confused with non-profit associations such as cultural, sports, consumers and religious associations, unions, health insurances and other foundations which are part of the so-called “third sector.”
Unlike what happens with corporations where shareholders are registered in (confidential) private documents, the founder’s directives, his name and the names of other who make up the founding council in addition to the officers such as the legal representative and the resident agent, are public, since the Foundation Act is registered in the Public Registry.
In order to promote trade, Panamanian legislation includes benefits to corporations and foundations in fiscal and commercial aspects, but in terms of patrimonial, family and hereditary planning, the benefits are greater for private interest foundations since the founder may order that, upon his death, all or part of his assets are transferred to a relative, friend or natural or legal person avoiding a tedious and prolonged probate proceedings.
Among other significant differences between both legal entities there are differences related to legal entities and societies. In a limited company, the assets of the company and its shares are managed with their own legal status and their shareholders are liable only up to the amount of their shares, while in a foundation, the donated assets are autonomous, separated from the founder’s personal inheritance.
Private interest foundation provides a series of benefits:
To summarize, a private interest foundation offers large benefits -as an alternative to the will- to protect assets and the patrimony of the family, these include tax benefits and other benefits to carry out commercial activities that generate profits to use them in the objectives of the organization.
Candanedo y Correa is a law firm based in Chiriqui, Panama; with over 12 years of experience in law and advisory services. We have the knowledge, experience and we’re more than willing to advise you and help you to constitute your private interest foundation or any other service you may need. Contact Us!