Panama was touted as a country where you could have bearer shares and there were little if no regulations to be concerned about. Changes adopted internationally have impacted Panama, and Panama has made a serious commitment to transparency and fighting illegal activities that take advantage of corporate structures. After an extensive consultation period with experts, practitioners and professionals, Panama finally adopted a regulatory framework in 2013 (modified in 2015) for the continued and lawful use of bearer shares, introducing the concept of Authorised Custodian, to maintain the custody of the bearer shares and comply with the minimum of information regarding the beneficial owner of said shares.
The purpose of holding the bearer shares in custody is to facilitate access, in the case of money laundering or other criminal proceedings, to the shareholder information of companies that issue bearer shares. There is still some debate regarding Panama’s immobilisation of bearer shares, as some parties in Panama consider that there is still a double standard operating with the OECD, as Wyoming (USA) still allows bearer instruments and the UK permits bearer warrants.
Innovative key features: introduction of the Authorised Custodian and automatic amendment of the Articles of Incorporation
Law 47 (2013) introduced the custody of bearer shares, allowing for a three-year grace period from the date it entered into effect (it would not come into effect for 2 years), permitting those companies that had bearer shares before the entry into effect of the law to keep their bearer share structure until August 5, 2018. However, in April 2015 this grace period was shortened for all companies, indicating that they only have until the 31st of December, 2015 to decide how they will handle bearer shares:
- either the company needs to adopt a resolution authorising the immobilisation of the bearer shares and delivery of the bearer shares to an authorised custodian
- or adopt registered shares only.
If the company does not adopt a board of director’s resolution (which should be filed at the public registry) indicating that they are keeping bearer shares and choosing to immobilise these, then the law automatically modifies the Articles of Incorporation of the company to prohibit the issuance of bearer shares and making all shares registered shares only.
One of the benefits of the April 2015 modification is that corporations will no longer have to pay to modify their Articles of Incorporation (which was a task that all registered agents and the Public Registry was seeing as monumental and costly) in order to adopt Registered Shares only. The law specifies that the change will occur automatically, unless the company specifically indicates that it will have bearer shares and that these will be immobilised and put into custody of an authorised custodian.
If you choose to place the Bearer Shares in the custody of an authorised custodian, you have a number of options:
- Those custodians authorised by the Banking Superintendence
- Banks, brokerage houses and custodians that have applied to be custodians and have presented their documentation (manuals and procedures) for the custody of bearer shares to their respective Superintendents
- Banks and foreign administrators of countries which are members of the Financial Action Task Force (FATF)
- Lawyers or law firms who are in the special register of the 4th Chamber (General Business) of the Supreme Court of Panama. You can see the list of approved lawyers and law firms on the Supreme Court’s website. Gray & Co. has already applied to be added to this list and should appear on it shortly. Once we have been approved and added to the list, we will request a certification of Authorised Custodian which may be provided to you upon request. (Gray & Co. was added to this list in August 2015).
Custodians of bearer shares will still be subject to the regular rules regarding privacy and confidentiality with respect to the ownership of these bearer shares, but may also be required by appropriate authorities through due process to reveal the information.
With respect to the issue of timing:
- Companies which were incorporated before the law came into effect will have only until the 31st of December 2015 to decide how they will handle the issue of bearer shares and to adopt a resolution deciding to hold the shares in Custody, otherwise the law provides that their Articles of Incorporation are automatically amended to indicate that no bearer shares are allowed. If you are choosing to change to Registered Shares only, you only need to coordinate with us the corporate resolution cancelling your bearer share certificate and issuing the new share certificate with registered shares.
- If you wish to keep Bearer Shares and have them held in custody, you need to contact us immediately to coordinate preparation of the Board of Directors resolution, to be filed with the Public Registry, indicating that you will have bearer shares held by an Authorised Custodian. This must be completed before the 31st of December, 2015.
- Gray & Co. will be incorporating all new companies with Registered Shares only, unless specifically requested by clients to include the option of Bearer Shares held by an Authorised Custodian. This has already been implemented with all new companies since April 2015.
- All companies incorporated as of the 4th of August, 2015 which provide that bearer shares may be issued and held in custody must deliver such bearer shares into the custody of the custodian within 20 days of incorporation.
Please contact us for more information regarding corporate structures and the use of bearer or registered shares.