The Panama Foundation

The legislation allows for the creation of one type of foundation: the Panama Private Foundation. Over the past decade, many countries have enacted foundation laws to attract global investors, but Panama’s Foundation Law, approved in 1995, remains the most successful among all jurisdictions offering similar structures.

Private Foundation

A Panama Private Foundation is established for the benefit of a person or group of persons known as beneficiaries. The foundation’s patrimony is owned by the foundation itself—thanks to its separate legal personality—and is managed by designated administrators for the beneficiaries’ benefit.

Separate Legal Identity

Unlike trusts, foundations possess legal personality, meaning the foundation itself becomes the legal owner of its assets. Based on Panamanian company law and Liechtenstein legal principles, Panamanian foundations must appoint administrators responsible for managing the foundation’s property. The foundation’s public deed must be registered, but only minimal information is disclosed publicly, ensuring confidentiality.

Key Features of a Panama Foundation

• Means of Establishment: A Panama foundation can only be constituted in writing, either by a public deed executed before a Notary or by a will. The deed must be registered with the Public Registry of Panama.
• Assets: Foundation assets may derive from any lawful activity and may include present or future assets of any kind.
• Foundation Deed: The foundation deed must include:
  • The foundation’s name, which must include the word “foundation”
  • The registered address in Panama
  • The purposes or objectives of the foundation
  • The initial constitutive assets
  • The composition of the board of administrators or the method of their appointment
  • The legal representative (a local Panamanian representative is required)
  • The duration of the foundation
  • A declaration that the foundation is constituted for the benefit of the beneficiaries. The list of beneficiaries is included in a private document—known as a Letter of Wishes or Regulations—signed by the founder and addressed to the administrators. This document is not filed publicly to preserve confidentiality.
• Legal Form: Once registered, the foundation becomes a new legal entity and the owner of its property.
• Termination: Foundations generally exist for an unlimited duration, except when used for investment, securitization, or specific purposes that may require limited terms.

Founder

• Rights of the Founder:
  • Supervise the administration of the foundation and request copies of accounts and inventories
  • Participate in legal proceedings regarding administrator appointments or asset disposition
  • Act as an administrator
  • Be a beneficiary during their lifetime

Administrator

• Duties of the Administrator:
  • Maintain possession and control of the foundation’s property
  • Ensure compliance with the foundation’s charter and applicable law
  • Comply with fiduciary obligations under the Foundations Law. Breaches require restitution of property and benefits derived from such violations.
• Conditions for the Administrator:
  • Administrators may be located outside Panama, but a local legal representative must always be appointed.
  • The founder may also serve as administrator.

Supervisory Protector

The foundation deed may establish a supervisory council or appoint a protector. This role oversees the administrators’ actions and may include powers to appoint or remove them.