Home   |   About us   |   Feedback   |   Contact Us  
       
  News - General    
   LATEST NEWS
   RELATED TOPICS
 

The Private Foundation -  looks like a company, acts like a trust

 

In 1926 the principality of Liechtenstein enacted a law creating ‘family foundations’, based on the concepts formulated via the Christian Church structures developed since the middles ages.

 

The Republic of Panama drew its inspiration from the Liechtenstein law and in 1995 enacted Law No.25, creating the ‘Private Foundation’   

 

Panama in effect adapted the European model to create a far more flexible and modern ‘Private Foundation’.   

 

Creating a Private Foundation

 

A Private Foundation is created when one or more “founders” formalise a document known as a ‘Foundation Charter’ which is  registered at the public registry in Panama.

 

Once registered at the public registry  the “Foundation Charter” creates a new legal entity without need for any further legal or administrative endorsements.

 

The ‘Founders’ undertake to make a donation, (foundation assets), of not less than US$10,000, however he obligation to contribute donations (whether in money or in kind), is not subject to a limited period of time and there is no legal requirement to publicly or officially advise it’s delivery. A

 

Once registered, the Foundation enjoys corporate and legal personality, therefore the question of ‘Certainty’ does not arise.

 

The Foundation has no ‘Beneficial Owner’, and therefore no participatory title is issued.

 

As a Bona Fide corporate legal entity, a Foundation therefore holds ‘title’ to any assets transferred or donated to it. A Foundation can enjoy perpetual existence, or be created with a limited life. The registered ‘Charter’ is in the public domain.

 

The Founder(s)

 

  • One or more persons (natural or bodies corporate)

  • Any nationality

  • Can appoint a nominee founder

  • Undertakes to contribute not less than US$10,000

  • Can  be a council member / protector / beneficiary

 

 

The Foundation Council

 

  • Administration of a Foundation is entrusted to the Foundation Council.

  • The Council is charged with the fulfilment of Foundation’s aims.

  • The Council must constitute a minimum of 1 if corporate member or 3 if natural persons.

  • There is NO restriction on the location of the Foundation Council.

  • The Foundation Council must act with the diligence of a paterfamilias.

  • The Foundation Council adopts / enforces / acts by the Foundation ‘Regulations’.

  • The Foundation Council must render account of its administration.

 

The Protector(s)

 

  • Foundation legislation refers to ‘Supervisory Bodies’.

  • These can be  bodies corporate or natural persons.

  • The ‘Protectors’ function is specified by the Foundation Charter

  • Protectors can be appointed privately in the Foundation Regulations.

  • The Protector could be the ‘Founder’.

 

The Beneficiary(ies)

 

  • Beneficiaries can be natural persons or bodies corporate.

  • NB: Could be another Foundation – this can offer great advantages.

  • Beneficiaries are appointed in the Foundation Regulations.

  • Beneficiaries are not a Foundation ‘owners’ / ‘creditors’.

  • Beneficiaries have the right to receive earnings / interest / assets.

  • A Foundation is not responsible for a Beneficiaries obligations.

  • A Beneficiary is not responsible for a Foundations obligations.

   

Third Parties

 

  • A Foundation can also appoint and include within the structure ‘Third Parties’ as advisors, managers, administrators etc. For example these could be investment managers / advisors.

  • Third Parties acquire their rights vis-à-vis the Foundation or Founder.

  • A Foundation can be created by a Founder or Third Parties.

  • A Third Parties participation in the Foundation has juridical effect.

  • Third Parties have obligation to exercise the instructions of their appointer

 

Private Foundation Structure 

   

  • The Foundation Charter is registered and is in the public domain.

  • In effect the Charter is similar to the ‘Memorandum of Association’.

  • The foundation Regulations are a private document - In effect they are similar to the ‘Articles of Association’.

  • It is a criminal offence under Panamanian law to disclose information on a Foundation unless required by law – (see article 35 of law No.25 of 1995)

 

Main Feature / Benefits of a Private Foundation

 

  • Foundation Charter registered at the public registry.

  • A Foundation is created under the law of a ‘Sovereign State’.

  • A Foundation is a ‘Corporate’ entity.

  • A Foundation enjoys legal personality.

  • A Foundation has no ‘Beneficial Owner’.

  • A Foundation can have perpetual or limited life.

  • A Foundation holds title to it’s assets.

  • The minimum patrimony is $10,000

  • A Foundation’s Founder can be an individual or corporate entity.

  • The Foundation Council can be located anywhere.

  • Protector(s) can be appointed.

  • Third Parties can be incorporated into structure

  • The Foundation Charter is in the public domain.

  • The Foundation Regulations are a private document.

  • The Foundation Council act according to Foundation Regulations.

  • Beneficiaries are appointed via the Foundation Regulations.

  • Beneficiaries can be individuals or corporate entities – Could be another Foundation.

  • Beneficiaries are not required at the outset.

  • No ‘Sham’ – ‘Certainty’ is established upon registration.

 

Therefore it can be clearly seen that the foundation offers many benefits to both the practitioner and client.

 

Some Examples of Uses of a Foundation:

  • Asset & ‘Family Protection’.

  • Inheritance planning

  • Collection of royalties etc.

  • Owner of real estate

  • Pre-Nuptial agreements

  • Investment holding

  • Holding insurance, investment and life policies

  • Pensions

  • Umbrella or Holding Structures

Administration of a Foundation

 

Administration of a foundation is extremely simple and follows a similar format to that of a company.

 

1. Inaugural Meeting:

 

a. Adopt Regulations (if applicable);

b. Resolve the opening of bank accounts & signatories (if required)

c. Appoint administration managers for day to day affairs (if required)

d. Determine basis for submitting accounts to Beneficiaries.

  

2. Information to be given to Registered Agent in Panama:

a. Material amendments to Foundation Charter;

b. Changes in Foundation Council members;

c. Change of administrator or change of administrator's address.

 

THIS IS THE ONLY GENERAL ADMINISTRATIVE INFORMATION REQUIRED 

  

3. The Foundation Council must be able to render account of it’s administration – to the Beneficiaries (if any) or to the Protector (if appointed). If neither then to the Founder.

 

4. Administration is simply carried out via resolution of the Foundation Council.

 

In Summary

 

  • The flexibility and advantages offered by the Private Foundation are many fold.

  • The features of corporate personality and ‘Certainty’ present the practitioner with a vehicle that can be lawfully structured to suit a wide variety of client scenarios, whilst at the same time relieving the practitioner of the onerous responsibilities of ‘Trusteeship’.  

  • When suitably structured and applying the principles of Public and Private International Law, the Private Foundation enables the practitioner to utilise a vehicle that is lawfully constituted under the law of a foreign Sovereign State.

  • Management and control of a Private foundation can however be located where so ever the practitioner chooses.

  • The Private Foundation can be lawfully structured in many ways and for many lawful uses / scenarios. This presents the practitioner with a unique vehicle to expand and enhance their activities and operations.

 

Should you wish to speak to one of our fully qualified financial advisors with regards to tax planning, just click here to provide us with your preferred contact details.  

 

      © 2004 - 06 All rights reserved by Candour Consultancy