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Every year Panama finds its way back onto the OECD grey-list or blacklist for failure to comply with new requirements (the rules keep changing). The new requirements now include transparency of being able to instantly provide information regarding any beneficial owner to a central governing body.
As such, last week Panama established the Superintendence of non-financial entities, as an independent body, similar to the Superintendent of Banks or the Superintendent of Securities. This will replace the Intendencia, which was part of the Ministry of Economy and Finance.
In previous years, Panama adopted legislation covering:
- accounting records for offshore corporations or foundations
- updated regulations regarding beneficial owner information held by Registered Agents and Know Your Client rules
- striking-off companies with outstanding annual renewal fees or whose registered agent resigned without replacement
- abolishing shelf companies, by requiring all companies to issue their shares within 30 days of incorporation
- automatic exchange of information through CRS
- onsite inspections of registered agent offices, to ensure compliance
- bearer share custody rules
So, the new regulations come as no surprise, in light of the fact that jurisdictions such as BVI and Belize have adopted new rules regarding registers of the beneficial owners of legal entities.
The following summary is based on the DRAFT legislation. These details have not been finalized and are still under debate.
Draft legislation to register a beneficial owner
The title of this legislation is «to create a unique registry of secure information to guarantee transparency». It begins, in Article one, establishing the purpose of the legislation «to create a Unique System of Registration of Beneficial Owners in the Republic of Panama». This is to assist in the supervision of lawyers or law firms who act as registered agents.
The supervisory body, according to the draft legislation, is the Intendencia. As of last week, the Superintendence replaced it – so we expect an update of that part of the legislation.
Final beneficiary
This new legislation defines the beneficial owner as being:
«natural person or persons that directly or indirectly holds, controls or exercises influence over the account, contractual relationships or business. Or the person in whose name or for whose benefit the transaction is undertaken, which includes the people who exercise control over the legal person. «
Article 2 – definitions
{Natural person = not a legal entity, trust or another intermediary body}
The article then goes on to establish the criteria for determining holding control or influence:
- Shareholders – holding 25% or more of the shares or voting rights in a corporation, unless publicly traded shares
- Controlling persons –
- in the case of a partnership, the partner or partners that control the partnership;
- for a transaction, the person calling the shots in the transaction;
- in the case of a trust, the settlor, beneficiary or another person that exercises effective control over the trust;
- for a company in dissolution – the liquidators;
- in the case of a deceased shareholder, the person that represents the estate of the deceased or executor.
- In any other situation, not mentioned above, the natural person that holds decision-making power for the legal entity or gives orders.
Who is subject to this register?
Any legal person (corporation, LLC, foundation or otherwise) who has not been suspended or dissolved.
The information which will be registered in the system is the following:
- For the legal entity:
- Name
- incorporation date
- registration details
- For the beneficial owner:
- complete name
- passport or identification document number
- address
- birthdate
- nationality
What is the unique system to register a beneficial owner of a Panamanian entity?
The database established by the Superintendence will facilitate and guarantee the confidentiality of the information contained in the Unique Registry of Beneficial Owners. Unlike the system established in the British Virgin Islands, it appears that the Superintendence will be responsible for the database (security & maintenance), which will be updated with the information provided by the registered agents regarding the beneficial owners.
The database, with limited access, guarantees the security of the data provided. Nonetheless, the Registered Agents are solely responsible for identifying the beneficial owner of each legal entity.
Access to the system will be limited to the registered agent and the Superintendence’s authorized employees. This security system identifies at all times the IP address of the person accessing the system.
Registered agents will update the data into the system within 15 working days after the incorporation of a company, change of the registered agent, or change of any beneficial owner. The registered agent will be able to print off confirmation of receipt of such updates for their files.
Register of Registered Agents
All registered agents (lawyers / law firms) will register with the Superintendence. Note: the law requires this already. Additionally, registered agents must indicate to the Superintendence how many companies/foundations/legal entities they provide services for.
Each Registered Agent will be issued with a unique CUR (Unique Registration Code), which should be mentioned in all transactions for legal entities where they are registered agent.
If a lawyer or law firm does NOT have their CUR, then the Public Registry of Panama will suspend any and all registration of documents until the CUR is provided.
Confidentiality and Professional Privilege
The law reserves special privacy for the information contained in this new database. Information from the database can only be provided to competent authorities within 7 days of receiving a request for information, in strict compliance with procedures as established in the coming regulations.
Anyone who has access to the confidential information regarding a beneficial owner holds a duty of confidentiality and may be subject to fines of up to US$100,000.00, without prejudice to any criminal charges or civil damages which may also be due.
Professional privilege: all information provided according to this legislation is not considered a violation of attorney-client privilege.
Hacking of the system or unauthorized access by any person or public official carries a fine of US$500,000.00 plus any criminal charges or civil damages which may apply.
Resignation of a Registered Agent
Any registered agent who resigns from a company shall notify the Superintendence of their resignation in order to be removed from the system with respect to that company. Likewise, any newly appointed registered agent shall inform the Superintendence of their appointment, so that they can be given access to the corporation/foundation in the system.
Failure to comply and provide the details of a beneficial owner
Fines for failure to comply with the system run from US$1,000 to $40,000.00 for registered agents. Additionally, other legal sanctions may proceed against the lawyer or law firm.
False information provided in the system carries criminal charges.
With respect to any company, foundation or legal entity which fails to update the information regarding the beneficial owner in the system, the Public Registry of Panama will be issued with a notice to suspend the company. Following this suspension, no documents can be registered with the Public Registry.
In the six months following this suspension any director, shareholder, registered agent or attorney-in-fact of the company may request the reactivation of the company, providing the Superintendence with the missing information regarding the beneficial ownership of the entity. Once registered, the entity will be taken off the suspension list at the public registry.
Automatic dissolution
In the event that six months pass without the entity being reactivated by providing the missing information, the entity will be considered dissolved. The Superintendence will notify the Public Registry of this automatic dissolution.
As more information becomes available, we will update our website.
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