Key Aspects of Panama’s Law 32: A Guide to International Business Companies

When considering establishing an international business in Panama, one of the most important regulations to understand is Law 32, which has governed the formation of companies in the country since 1927. This long-standing legislation provides the legal framework for Panama’s renowned International Business Companies (IBCs), ensuring stability and flexibility for business owners. Whether setting up a new venture or expanding an existing one, compliance with Law 32 is essential to secure your business operations.

At Delvalle & Delvalle, our experienced legal team guides clients through the complexities of Law 32, ensuring that every aspect of your company’s formation meets Panama’s legal standards. In this article, we’ll break down the key elements of Law 32 and offer insights into how it can benefit your international business strategy.

Formation of Companies Under Law 32

Under Panama’s Law 32, a company can be formed by two or more individuals, regardless of age, nationality, or gender. This flexibility allows international investors to easily establish their businesses, making Panama a top destination for global enterprises. To meet the legal requirements of company formation, each business must appoint critical officers, including a President, Secretary, and Treasurer. The same individual may occupy two or more of these positions as long as it is specified in the Corporate Agreement.

The Corporate Agreement plays a pivotal role in the company formation process. It must contain essential information, such as:

• The names and addresses of the subscribers
• The name and address of the company
• The company’s purpose
• The capital stock and par value of shares
• The duration of the company
• The name and address of the agent in Panama
• The names and addresses of the directors

Working with Delvalle & Delvalle ensures your Corporate Agreement is comprehensive and compliant with all legal standards, setting a solid foundation for your business.

Registration Requirements and Documentation

Once the Corporate Agreement is drafted, it must be filed with the Commercial Registry. This step is essential to establishing the company legally in Panama. If changes are needed, the agreement can be amended anytime by submitting updates to the registry. For foreign companies seeking to operate in Panama, additional documents are required, including a copy of the company’s Corporate Agreement, the latest balance sheet, and a certificate of incorporation authenticated by a Panamanian Consul.

Under regulatory requirements, every company must maintain a Stock Registry that includes the names and personal details of shareholders. If bearer shares have been issued, the registry must also record the number of shares on the date of issuance and confirm whether they have been fully paid.

Corporate Powers and Rights

Under Law 32, companies formed in Panama are granted significant powers to operate effectively within local and international markets. These companies can acquire, purchase, and hold movable and immovable property. Furthermore, they can accept pledges, mortgages, and leases and even assume tax liabilities. Such flexibility allows businesses to diversify their assets and investments.

A company can also issue multiple classes of shares, with or without par value. Bearer shares, however, may only be issued if they have been fully paid. Companies must document all share-related transactions appropriately to avoid legal complications.

Another vital aspect of Law 32 is the requirement for companies to maintain an office in Panama or at another location specified in the Corporate Agreement. Additionally, the company must keep a Stock Registry that records information about its shareholders. For businesses that issue bearer shares, the registry must specify the number of shares issued, their date of issuance, and whether they are fully paid.

Delvalle & Delvalle assists companies in navigating these corporate powers and rights, ensuring that their operations align with Panama’s legal framework and that all necessary records are meticulously maintained.

Shareholders and Board of Directors

Under Law 32, Panamanian companies’ governance involves a structured system where shareholders and directors play crucial roles. Shareholder meetings must be convened in writing, typically by the President or another authorized individual as per the Corporate Agreement. Shareholders have the right to vote on important matters concerning the company’s direction, and they can also appoint representatives through a public or private document to vote on their behalf.

The Board of Directors is responsible for overseeing the company’s operations. It must consist of at least three members, each of legal age. This board holds the authority to make key business decisions, but most directors must be present. The structure provided by Law 32 ensures that companies maintain a transparent and accountable governance model, which is essential for building trust among shareholders.

Mergers and Dissolutions

Law 32 provides clear guidelines for merging two or more companies to form a new entity. The involved companies must sign a formal agreement outlining the terms and conditions to initiate the merger. This agreement must then be submitted to each corporation’s shareholders for approval. Once the shareholders have voted in favor of the merger, the new company must be registered with the Commercial Registry to formalize the process legally.

Mergers combine resources and expertise to provide businesses with opportunities for growth, expansion, or restructuring. However, the process requires careful legal attention to meet all regulatory requirements. Delvalle & Delvalle is experienced in guiding companies through mergers, ensuring that every detail is handled correctly, from drafting agreements to filing the necessary documents.

When it comes to dissolving a company, Law 32 stipulates that the decision to dissolve must be approved by the Board of Directors, with a majority vote in favor. Once the decision is made, the shareholders’ board must also approve the dissolution through a formal resolution. A copy of this resolution must be published at least once in a newspaper based in the company’s location. After publication, the dissolution process continues with filing the appropriate documentation with the Commercial Registry.

The dissolution process can be complex, requiring precise coordination to fulfill all legal obligations. At Delvalle & Delvalle, our legal team offers expert guidance through every step of the process, ensuring that companies are properly dissolved and that all legal and financial matters are resolved.

Understanding the key aspects of Law 32 is essential for anyone looking to establish or manage an international business company in Panama. The law offers flexibility and a strong legal framework, ensuring businesses can operate efficiently while meeting all necessary legal requirements. Law 32 provides a comprehensive guide for businesses navigating the Panamanian market, from company formation and registration to mergers and dissolutions.

At Delvalle & Delvalle, we specialize in assisting clients through every phase of the process, ensuring their companies fully comply with Panamanian law. Whether you are forming a new company, undergoing a merger, or considering dissolution, our team is here to provide the legal support you need. Schedule a consultation today, and let us help you secure the future of your business.