Article 1. One or more natural or juridical persons by themselves or
through third parties, may create a private foundation in
accordance with the provisions set forth in this law. For such
purposes, the endowment of a patrimony exclusively dedicated to
the objectives or purposes expressly stipulated in the
foundation charter is required. The initial patrimony may be
increased by the creator of the foundation, hereinafter called
the founder, or by any other person.
Article 2. Private foundations shall be governed by the foundation charter
and its regulations, as well as by the provisions of this law
and other legal or regulatory provisions that may be applicable.
The provisions of Title II of Book I of the Civil Code shall not
apply to these foundations.
Article 3. Private foundations shall not be for profit. However, they may
carry out mercantile activities in a non-habitual manner or
exercise the rights deriving from titles representing the
capital of mercantile corporations that make up the patrimony of
the foundation, provided that the economic results or proceeds
of such activities be dedicated exclusively for the purposes of
Article 4. Private foundations may be constituted to become effective at
the time of constitution or after the death of its founder, by
anyone of the following methods:
a) Through a
private document, executed by the founder, whose signature must
be authenticated by a notary public at the place of
b) Directly before a notary public at the place of constitution.
Whichever may be the method of constitution, it must comply with
the formalities established in the present Law, for the creation
of foundations. In case of a foundation being created either by
public or private document, to have effect after the death of
the founder, the formalities stipulated for the execution of
testaments shall not apply.
Article 5. The foundation charter shall contain:
1. The name of the foundation, expressed in any language with
characters of the Latin alphabet, which shall not be equal or
similar to that of a foundation previously existing in the
Republic of Panama, 80 as to avoid confusion. The name must
include the word "foundation" to distinguish it from other
natural or juridical persons of a different nature.
2. The initial patrimony of the foundation, expressed in any
currency of legal tender that in no case shall be less to a sum
equivalent ten thousand Balboas (B/10,000.00) =U.S. Dollars .
3. A complete and clear designation, of the member or members of
the Foundation Council, to which the founder may belong,
including their addresses.
4. The domicile of the foundation.
5. The name and address of the Resident Agent of the foundation
in the Republic of Panama, which shall be an attorney or a law
firm, who must countersign the foundation charter prior to its
registration at the Public Registry.
6. The purposes of the foundation.
7. The manner in which the beneficiaries of the foundation shall
be designated, among which the founder may be included.
8. The reservation of the right to amend the foundation charter
whenever deemed convenient;
9. The duration of the foundation.
10. The destination to be given to the assets of the foundation
and the method of liquidation of its patrimony in case of
11. Any other lawful clause that the founder may deem
Article 6. The foundation charter, as well as any amendment thereto must be
written in any language with characters of the Latin alphabet,
and must comply with the regulations for the registration of
acts and titles in the Public Registry; for which purpose it
must be previously protocolized by a notary public of the
Republic (of Panama). If the foundation charter or its
amendments are not written in the Spanish language, they must be
protocolized together with their (Spanish) translation by an
authorized public translator of the Republic of Panama.
Article 7. Any amendment to the foundation charter, when permitted, shall
be carried out and executed in accordance with what is
established therein. The respective agreement, resolution or act
of amendment shall contain the date on which it was carried out
and the name, clearly identifiable, of the person or persons
subscribing it and their signatures which shall be authenticated
by a notary public of the place where the document is executed.
Article 8. Every private foundation must pay a registration fee and an
annual maintenance tax equivalent to those established for
corporations in Articles 318 and 318A of the Fiscal Code. The
procedure and method of payment, the surcharge for late payment,
the consequences for lack of payment and all other complementary
provisions of the aforementioned legal principles, shall be
applied to private foundations.
Article 9. The registration at the Public Registry of the foundation
charter shall bestow upon the foundation juridical personality
without the need for any other legal or administrative
authorization. Besides, the registration at the Public Registry
constitutes a means of publicity before third parties.
Consequently, the foundation may acquire and own assets of any
kind, incur obligations and be a party to any type of
administrative and judicial proceedings in accordance with
applicable legal provisions.
Article 10. Once the foundation has obtained its juridical personality, the
founder or third parties that have pledged to contribute assets
to the foundation, on their own or at the request of any person
with interest in the foundation, shall formalize the transfer to
the foundation of the assets so pledged. When the foundation is
constituted to be effective upon the demise of the founder, it
shall be deemed to have existed prior to such death, in respect
to the donations that he (she) may have made to the foundation.
Article 11. For all legal purposes, the assets of the foundation shall
constitute a separate patrimony from the personal assets of the
founder. Therefore they cannot be sequestered, embargoed or
subject to any precautionary action or measure, except for
obligations incurred, or for damages caused by virtue of
fulfilling the purposes and objectives of the foundation, on
behalf of the legitimate rights of its beneficiaries. In no case
shall the assets respond for personal obligations of the founder
or of the beneficiaries.
Article 12. Foundations shall be irrevocable, except in the following cases:
a) When the foundation charter has not been registered at the
b) When the opposite is expressly established in the foundation
c) For any of the causes of revocation of donations.
The transfers (of assets) made to foundations shall be
irrevocable by whoever has made the transfer, unless the
opposite is expressly established in the act of transfer.
Article 13. In addition to the provisions of the previous article, when the
foundation has been created to be effective after the demise of
the founder, the latter shall have the exclusive and unlimited
right to revoke it.
The heirs of the founder shall not have the right to revoke the
creation or the transfers, even if the foundation has not been
registered in the Public Registry prior to the demise of the
Article 14. The existence of legal provisions in inheritance matters in the
domicile of the founder or of its beneficiaries, shall not be
opposable to the foundation, nor shall it affect its validity,
or prevent the fulfilment of its objectives as provided for in
the foundation charter or its regulations.
Article 15. The creditors of the founder or of a third party shall have the
right to dispute the contributions or transfer of assets in
favour of a foundation, when the transfer constitutes an act of
fraud to the creditors. The rights and actions of such creditors
shall prescribe three (3) years from the date of the
contribution or transfer of the assets to the foundation.
Article 16. The patrimony of the foundation may originate from any lawful
business and may consist of present or future assets of any
nature. Periodic sums of money or other assets may also be
incorporated to the patrimony by the founder or by third
parties. The transfer of assets to the patrimony of the
foundation may be effected by public or private document.
Nevertheless, in the case of real estate, the transfer must
conform with the rules for the transfer of real estate.
Article 17. The foundation should have a Foundation Council, whose duties or
responsibilities shall be established in the foundation charter
or in its regulations. Unless it be a juridical person, the
number of members of the Foundation Council hall not be less
than three (3).
Article 18. The Foundation Council shall be in charge of carrying out the
purposes or objectives of the Foundation. Unless otherwise
stated in the foundation charter or its regulations, the
Foundation Council shall have the following general obligations
1. To administer the assets of the foundation, in accordance
with the foundation charter or its regulations.
2. Enter into acts, contracts or lawful businesses that may be
suitable or necessary to fulfil the object of the foundation,
and to include in such contracts, agreements and other
instruments or obligations, such clauses and conditions as are
necessary and convenient, which conform to the purposes of the
foundation and are not contrary to the law, to morals, to bonus
mores or to public order.
3. To inform the beneficiaries of the foundation of the
patrimonial situation of the latter, as established in the
foundation charter or its regulations.
4. To deliver to the beneficiaries of the foundation the assets
or resources set up in their favour by the foundation charter or
5. To carry out all such acts or contracts which are permitted
to the foundation by the present Law and other applicable legal
or regulatory provisions.
Article 19. The foundation charter or its regulations may provide that the
members of the Foundation Council may only exercise their powers
by obtaining previous authorization of a protector, a committee
or any other supervisory body, appointed by the founder or by
the majority of the founders. The members of the Foundation
Council shall not held liable for the 1088 or deterioration of
the assets of the foundation, nor for any damages or prejudice
caused, when said authorization has been duly obtained.
Article 20. Unless otherwise provided for in the foundation charter or its
regulations, the Foundation Council must render an accounting of
its activities to the beneficiaries and, when applicable, to the
supervisory body. If the foundation charter or its regulations
stipulate nothing in this regards, the rendering of accounts
must be done annually. If the accounts 90 rendered are not
objected within the term established in the foundation charter
or its regulations, in lack of it, it shall be deemed as having
been approved within ninety (90) days from the day it was
received, for which purpose, record of this term shall be made
in the report rendering the accounts.
Such period having lapsed or the account approved, the members
of the Foundation Council shall be exempted from liability for
their administration, unless they had failed to act with the
diligence of a bonus paterfamilias. Such approval does not
exonerate them before the beneficiaries or third parties having
an interest in the foundation, for damages caused due to gross
negligence or fraud in the administration of the foundation.
Article 21. In the foundation charter the founder may reserve for
himself/herself or for other persons, the right to remove the
members of the foundation Council, as well as to appoint or add
Article 22. When the foundation charter or its regulations do not establish
anything in respect to the right to and the causes for removal
of the members of the Foundation Council, these may be
judicially removed, through summary proceedings, for the
1. When their interests are incompatible with the interests of
the beneficiaries or the founder.
2. If the administration of the assets of the foundation lacked
the diligence of a bonus paterfamilias.
3. If they are convicted for a crime against private property or
public faith. In this case, while the criminal proceedings are
in progress, the temporary suspension of the member on trial may
4. For incapacity or impossibility to carry out the objectives
of the foundation, from the time such causes may arise.
5. For insolvency or bankruptcy proceedings.
Article 23. The founder and beneficiary or beneficiaries may request the
judicial removal of the members of the Foundation Council.
Should the beneficiaries be disabled or under age they may be
represented by whoever exercise upon them the "patria potestas"
or guardianship, as the case may be. The judgement of the court decreeing the removal, shall appoint
new members in replacement of the previous ones, who shall be
persons with sufficient capacity, competence and good moral
standing to administer the assets of the foundation, in
accordance with the purposes established by the founder.
Article 24. The foundation charter or its regulations may provide for the
constitution of supervisory bodies, that may be constituted by
natural or juridical persons, such as auditors, protectors of
the foundation or others. The duties of the supervisory bodies shall be established in the
foundation charter or its regulations and may include, among
others, the following:
1. To ensure the fulfillment of the purposes of the foundation
by the Foundation Council and (to protect) the rights and
interests of the beneficiaries;
2. To demand from the Foundation Council, the rendering of
3. To modify the purposes and objectives of the foundation, if
and when they become too costly or impossible to fulfil.
4. To appoint new members of the Foundation Council due to
temporary or permanent absence or for expiration of the period
of anyone of them.
5. To appoint new members of the Foundation Council in cases of
temporary or accidental absence of anyone of them.
6. To increase the number of members of the Foundation Council.
7. To approve the acts adopted by the Foundation Council, as
indicated in the foundation charter or its regulations.
8. To guard the assets of the foundation and observe their
application to the uses or purposes stated in the foundation
9. To exclude beneficiaries of the foundation and to add others
in accordance with the provisions of the foundation charter or
Article 25. The foundation shall be dissolved due to:
1. Reaching the day in which the foundation must terminate, in
accordance with the foundation charter.
2. The fulfillment of the purposes for which it was constituted
or if their fulfillment becomes impossible.
3. Being in a state of insolvency, cessation of payments or due
to bankruptcy proceedings having been declared judicially.
4. The loss or total extinction of the assets of the foundation.
5. Its revocation.
6. Any other cause established in the foundation charter or in
the present Law.
Article 26. Every beneficiary of the foundation may contest any acts of the
foundation that may damage the rights conferred upon him/her,
denouncing such circumstance to the protector or to other
supervisory bodies, if any; or lacking them, directly promoting
the respective judicial claim, before a competent court of the
domicile of the foundation.
Article 27. The acts of constitution, amendment or extinction of the
foundation, as well as the acts of transfer, transmittal or
encumbrance of the assets of the foundation and the income
derived from such assets or any other act in connection
therewith, shall be exempt from all taxes, contributions,
duties, liens or assessments of any kind or denomination,
provided that such assets are:
1. Assets located abroad.
2. Money deposited by natural or juridical persons whose income
is not derived from Panamanian sources nor taxable in Panama for
any reason whatsoever.
3. Shares or securities of any kind, issued by corporations
which income is not derived from Panamanian sources or when such
income is not taxable for any reason whatsoever, even when such
shares or securities be deposited in the Republic of Panama.
The acts of transfer of real estate, titles, certificates of
deposit, securities, money or shares, carried out in fulfillment
of the purposes or objectives, or for the extinction of the
foundation, in favour of relatives within the first grade of
consanguinity and of the spouse of the founder, shall also be
exempted from all taxes.
Article 28. Foundations constituted in accordance with a foreign law may
become subject to the provisions of this law.
Article 29. Foundations referred to in the previous article that opt to
become subject to the provisions of this Law, shall present a
Certificate of Continuation, issued by such bodies as their
internal regime may call for, and which shall contain:
1. The name of the foundation and the date of its constitution.
2. Data about its registration or deposit (of the charter) at
its country of origin.
3. An express declaration of its desire to continue its legal
existence as a Panamanian foundation.
4. Requirements stipulated under Article 5 of this Law, for the
constitution of private foundations.
Article 30. The certification containing the resolution of continuation and
other requirements mentioned in the preceding paragraph must
have the following documents attached there to:
1. Copy of the original act of constitution of the foundation
expressing its desire to continue in Panama, along with any
2. A power of attorney granted to a Panamanian attorney to carry
out the necessary proceedings to make effective the continuation
of the foundation in Panama.
The certificate of continuation, as well as the documents
attached thereto referred to in this Law, shall be duly
protocolized and registered at the Public Registry so that the
foundation may continue its legal existence as a private
foundation in the Republic of Panama.
Article 31. In the cases foreseen in Article 26, the responsibilities,
duties and rights of the foundation acquired prior to the change
or domicile or legislation, shall continue in force, as well as
the proceedings already initiated against it or those that the
foundation may have promoted, without being affected such rights
and obligations due to the change authorized by the aforesaid
Article 32. The foundations constituted in accordance with this Law, as well
as the assets comprising its patrimony, may be transferred or
become subject to the laws and jurisdiction of another country,
as may be provided by the foundation charter or its regulations.
Article 33. Registrations related to private foundations shall be effected
at the Public Registry in a special section that shall be named
"Section of Private Foundations" The Executive Branch through
the Ministry of Government and Justice shall issue the
regulations applicable to such section.
Article 34. To avoid the unlawful use of private foundation, all legal
provisions contained in Executive Decree No. 468 of 1994 and any
other rule in force aiming at fighting money laundering derived
from drug-trafficking, shall apply for their operation.
Article 35. The members of the Foundation Council, of the supervisory
bodies, if any, as well as the public or private employees who
might have any knowledge of the activities, transactions or
operations of the foundations shall at all times maintain
secrecy and confidentiality in this respect. Infringement of
this shall be penalized with six (6) months imprisonment and a
$50,000.00 fine without prejudice of the corresponding civil
The provisions of this article shall apply without prejudice of
the information which must be disclosed to the official
authorities and of the inspections that they must carry out in
the manner established by the law.
Article 36. Any controversy for which there is no special procedure in this
Law, shall be resolved through summary proceedings.
The foundation charter or the regulations of the foundation may
establish that any controversy arising in respect to the
foundation shall be resolved by arbiters or arbitrators, as well
as establish the procedure they should abide by. In the event
that such procedure is not established, the rules in respect to
such matters, as contained in the Judicial Code, shall apply.
Article 37. This law shall be effective from the date of its publication.