Offshore companies must now maintain accounting records and supporting documentation, either within or outside of Panama. Furthermore, Law No. 52 establishes new sanctions for legal entities that do not comply with the annual payment of franchise tax and shareholders that do not deposit their bearer shares with an authorized custodian.

On October 28, 2016, Panama enacted Law No. 52, requiring offshore companies to keep accounting records and supporting documentation either in the local office of their resident agent or any other place within or outside of Panama.

Law No. 52 defines the term "legal entity" as any corporation, limited liability company or any other type of entity used for commercial purposes, including private interest foundations.

Law No. 52 requires resident agents to maintain information on where the accounting records of legal entities are being held and the contact information of the person holding them.

Furthermore, legal entities must maintain their accounting records and supporting documentation for no less than five years from the end of the calendar year within which the transaction took place or the last day after the legal entity ceased operations.

New sanctions applicable to legal entities

Furthermore, Law No. 52 modifies Article 318-A of the Fiscal Code to allow the Public Registry of Panama to impose new sanctions on legal entities that do not comply with the annual payment of franchise tax.

Legal entities may have their corporate rights suspended if:

— The legal entity does not assign a new resident agent within 90 days of the removal or resignation of the previous resident agent

— The legal entity pays the franchise tax late for three consecutive years

— The legal entity fails to pay a fine

If a legal entity's corporate rights are suspended, the legal entity will not be able to:

— Initiate legal proceedings, conduct business or dispose of the entity's assets

— Make claims or exercise any right

— Perform any corporate action that would be binding for the legal entity

Once the suspension is registered with the Public Registry of Panama, the legal entity will not be reactivated with the registry for two years. If the reactivation does not occur, the legal entity will be dissolved and its assets will be liquidated.

New enforcements for bearer shares (Law 47 of 2013)

Under Law 47, authorized custodians must keep identity information on the owners of the bearer shares issued by Panamanian corporations (i.e., bearer shareholders must maintain their share certificates under the care of a custodian). According to Article 21, if shareholders do not comply with this legal requirement, then the shareholder will not be able to exercise the political and economic rights inherent in their bearer shares.

However, Law 52 amends Article 21 by establishing that the shareholders' political and economic rights would be canceled immediately by rule of law.

———————————————