Difference Between Directors and Shareholders in a Panama Company

To establish a company in Panama, it is important to know the main differences between the parts that form it, and its key functions within them. Many clients have confusion between the two figures. By understanding the position and roles, of each of them, the client can make a better decision on regard to the way the company will be structured:

• Companies in Panama must be formed by a minimum of three (3) directors who may be three (3) individuals of any nationality as long as they are of legal age. On the other hand, the shareholders have no minimum number required; a single natural or legal person also of any nationality can form the board of shareholders.
• The directors are not considered the owners of the company,  but those who administer it. The directors are not entitled to vote in the decisions of the shareholder’s meeting unless the articles of incorporation established otherwise. O the other hand, the shareholders are considered the owners of the company; having a common stock shall give the entitlement to make decisions within the shareholders’ meeting.
• The names and addresses of the directors are published in the articles of incorporation, which is the public document by which the company is established and registered. Contrary, the identities of the shareholders are 100% private because the shares certificates are not registered in any document or public institution.
• If the client wishes to preserve the confidentiality or simply do not have three people of trust or to fill the positions of directors, it has the choice of appointing a nominee director (members of Delvalle & Delvalle), however the client, or the natural or juridical person designee by him/her, must always be appointed as a shareholder to have real control of the entity.
• The nominee directors never act as signatories on bank accounts, the shareholder must always be the signatory.

Note: For the opening of bank accounts, if the client appoints its own directors, these directors must travel to Panama along with the shareholders- signatories of the account, regardless of whether they are signatories or not. Also, they must provide all documents required by the Bank.

For more information visit:   Bank Accounts: Requirements to Open an Account in Panama

Although there are many differences between shareholders and directors, there are certain similarities; For example, directors and shareholders can be of any nationality, they do not require Panamanian citizenship or be physically in Panama to maintain their positions.

Shareholders and Directors in Panamanian Corporations: Roles, Differences, and Keys for Effective Management

In Panama, corporations (sociedades anónimas) are a popular option for business structuring, attracting both local entrepreneurs and international investors. However, when establishing a corporation, it is fundamental to understand the differences between the roles of shareholders and directors, as each plays a crucial part in the entity’s management and control. Below, the most important distinctions between shareholders and directors are highlighted, allowing clients to make informed decisions regarding the formation and administration of their corporations in Panama.

Composition of the Corporation

When establishing a corporation in Panama, it is essential to know how this legal structure is composed. The participation of a minimum of three directors is required, who can be individuals of any nationality, provided they are of legal age. This ensures that the administration of the corporation is in the hands of a diverse and qualified group.

In contrast, there is no minimum number required for shareholders. A single person, whether natural or legal, can constitute the shareholders’ meeting, allowing the composition of the corporation to be adapted to the client’s specific needs.

Ownership and Management

It is vital to differentiate between those who own the company and those who manage it. Directors play a crucial role in daily management but are not considered the owners of the company. Their role is purely administrative, managing operations and ensuring compliance with established regulations.

On the contrary, shareholders are the true owners of the company. By holding common shares, they have decision-making power in shareholders’ meetings, where company policies and strategies are determined. This ownership right grants them final control over the direction of the company.

Privacy and Public Disclosure

Privacy and public disclosure in Panamanian corporations vary significantly between shareholders and directors:

• Directors: Their names and addresses are publicly registered in the articles of incorporation (pacto social), meaning this information is accessible to the public.
• Shareholders: Their identity remains completely private, as share certificates are not registered with any public institution, ensuring a high degree of confidentiality.

Responsibilities and Control

The responsibilities and level of control exercised by shareholders and directors show significant differences:

• Shareholders:
  • Are considered the owners of the company.
  • Their liability is limited to the amount invested in shares.
  • They cannot be held responsible beyond their investment in case of debts.
• Directors:
  • Are responsible for daily administration.
  • Are not personally liable for the debts of the corporation.

Management and Control Options

For clients who value confidentiality or who do not have trusted individuals to fill director positions, alternatives exist that allow for effective control over the corporation without compromising privacy. A popular option is hiring nominee directors, who can be listed in the articles of incorporation.

It is crucial that, although nominee directors fulfill an administrative function, the client or a person designated by them appears as a shareholder within the corporation to preserve real control over the entity. This ensures that strategic and financial decisions remain in the hands of the legitimate owner.

Understanding the differences between shareholders and directors in Panamanian corporations is essential for making informed decisions about the entity’s structure and administration. The privacy of shareholders, compared to the public disclosure of directors, offers investors the necessary flexibility to structure their corporations according to their needs and desired levels of confidentiality. With a clear understanding of these roles, clients can confidently navigate the complexities of corporations in Panama, ensuring the long-term success and sustainability of their businesses.