Information Guides

Foundations of Panama: Management and Operation of Private Interest Foundations

At the crossroads of global trade and international finance, we find Panama, a nation recognized for its vibrant economy and the flexibility of its legal system. Among its various legal structures, one that stands out for its particularity and benefits is that of Private Interest Foundations. Also known as Panama foundations, these entities offer a variety of advantages for those seeking to protect and manage their assets efficiently.

Even though Panama foundations are not business entities themselves, they play a crucial role in asset management and estate planning. However, understanding its operation and administration can be somewhat enigmatic for those unfamiliar with this type of structures. Who manages them? How are they managed? What are the roles of the different actors in its management?

If these questions are on your mind, you are in the right place. At Delvalle & Delvalle, with our extensive experience and knowledge in Panamanian foundation law, we are here to unravel the mysteries of private interest foundations in Panama and provide you with clear and detailed guidance on their management and operation.

In this article, we will delve into the fascinating world of Panama foundations, explore their structure, operation, and how proper administration can help you achieve your wealth protection goals. So, sit back, relax, and let’s take this informative journey together.

Organizational structure of a Private Interest Foundation in Panama

What are Private Interest Foundations?

Private Interest Foundations are unique and exclusive legal entities of their type, very similar to a trust or fiducia in their nature and purpose, but with their own legal personality. Born within Panamanian legislation in 1995, private interest foundations, also known as Panama foundations, have managed to establish themselves as valuable and very effective tools for the protection and administration of assets.

These foundations, contrary to what their name might suggest, are not intended for charitable or charitable activities of a public nature. Its main function lies in asset protection and succession planning. They allow the transfer of assets (real estate, bank accounts, shares, among others) to the foundation, separating them from the founder’s personal assets. In this way, the foundation’s assets remain protected against any legal contingency that may arise in the founder’s personal or business life.

It is important to mention that, while private interest foundations provide a layer of protection and anonymity, they are not intended for commercial activities. They cannot, for example, directly engage in day-to-day business activities, although they may own shares or interests in companies that do.

At Delvalle & Delvalle, we understand the various implications of this fact, and we work with you to ensure that your foundation complies with all relevant regulations. Knowing the law and its correct application can make a big difference in the safety and effectiveness of your foundation. At the end of the day, Panama foundations are at the heart of estate and financial planning, and their proper administration and operation are crucial to the success of your estate goals and objectives.

Structure of a Private Interest Foundation

Private Interest Foundations in Panama present a unique and differentiated structure, which is made up of several key roles, each with its responsibilities and functions:

  • Founder: It is the person or entity that creates the foundation, donating property or assets to it. Once the donation is made, the assets become the property of the foundation and are not part of the founder’s personal assets.
  • Foundation Council: This is the entity that, in most cases, manages the assets of the foundation. It can be made up of three natural persons of any nationality, or by a legal entity, also of any nationality. Their degree of control in the administration of the foundation may vary, depending on the foundation regulations.
  • Protector: This is a very important figure within the foundation. Although he is not necessarily the administrator of the assets, he has the power to supervise the actions of the Foundation Council. The Protector can be the founder himself, or a person he trusts.
  • Beneficiary(s): They are those who enjoy the benefits of the foundation, in accordance with the provisions of the founding act and the founding regulations.

Administration of Private Interest Foundations

Understanding who manages Private Interest Foundations and how they are managed is a fundamental aspect for their correct functioning. This is where the Foundation Council comes into play. Usually, this entity is in charge of managing the assets of the foundation. However, the degree of control it has may vary depending on the founding regulations and the figure of the Protector.

The Protector, as we mentioned before, plays a vital role in overseeing the Foundation Council. Depending on how it is set out in the founding regulations, the Council may need the approval of the Protector to carry out certain actions or make decisions. This system of mutual control helps ensure that the foundation’s assets are managed effectively and in the best interests of the founder and beneficiaries.

The Beneficiaries, although in theory they do not have administrative powers, are a fundamental piece in the operation of private interest foundations in Panama. They enjoy the benefits of the foundation, as provided in the founding act and founding regulations. That is why, at Delvalle & Delvalle, we work closely with everyone involved to ensure that private interest foundations are managed and operated effectively and in accordance with the needs and desires of the founder and beneficiaries.

Beneficiaries enjoying the benefits of the foundation in Panama

The role of the Beneficiary in the administration

At first glance, it may appear that the beneficiaries of Private Interest Foundations in Panama play a passive role in the administration of the foundation. Although it is true that, according to the foundation regulations, the beneficiaries generally do not have administrative powers, their role is, without a doubt, essential for the functioning of the foundation.

Beneficiaries are those who enjoy the fruits of the foundation, whether in terms of assets, income or any other benefit derived from the assets of the foundation. These benefits are stipulated and regulated through the founding act and the founding regulations.

However, it is important to clarify that the beneficiaries do not have ownership over the assets of the foundation. These assets belong to the foundation as an entity, and the beneficiaries are only entitled to the benefits generated by them, in accordance with the terms established in the founding minutes and regulations.

On the other hand, in specific cases, when talking about opening bank accounts, banks usually require that the signatory of the account be the primary beneficiary. This means that, although the beneficiaries do not have a direct role in the administration of the foundation, their participation is crucial in certain operational aspects.

At Delvalle & Delvalle, we understand the importance of beneficiaries in Private Interest Foundations and work to ensure that their interests are well represented and protected. Therefore, we pay special attention to the drafting of the founding minutes and regulations, to ensure that they accurately reflect the intentions of the founder and the rights of the beneficiaries.

Private interest foundations, commonly called “Offshore foundations”, have established themselves as extraordinarily useful legal instruments for asset protection and succession planning. Their exclusive structure and level of safeguarding have made them a favorite option for people and families globally who seek to protect their assets and secure their future.

At the core of its efficiency lies precise and expert administration. Understanding the roles and obligations of the various participants in the foundation, from the founder to the beneficiary, is essential to ensure its proper functioning.

At Delvalle & Delvalle, we have extensive experience in understanding and managing private interest foundations in Panama. We are proud to be able to offer our clients the guidance and advice required to navigate the complexity of these structures. Our primary purpose is to ensure that our clients’ foundations are properly structured and managed so that they meet their needs and objectives, while complying with all relevant regulations.

Entering the intriguing world of Panama foundations may seem intimidating at first, but with the right advice, it can become a rewarding path. If you are considering creating a private interest foundation or already have one and need advice, do not hesitate to contact us. At Delvalle & Delvalle, we are prepared to help you take the right steps toward a safe and prosperous future.

Remember, private interest foundations are not simply a legal tool, they are the key to protecting your assets and ensuring the well-being of future generations.

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