Basic concepts
Private interest foundations are a legal structure that provides goods with an excellent protection.
These are legal entities created by a Founder (a natural or artificial person) to which he will transfer a specific patrimony. The objective of this Private Interest Foundation will be to administrate and protect those assets and goods according to the regulations established by the Founder. Foundations have rights and obligations of their own, completely separated from those of the Founder, the Beneficiaries and the Protector. This separation of goods makes foundations become a great legal instrument of administration, disposition and protection of a specific patrimony since at no moment they will be responsible for any third party’s debts or obligations, but their own as a foundation.
Different to companies, Private Interest Foundations are not business oriented; however, on a non regular basis, they can carry out commercial activities. Private Interest Foundations can hold bank accounts, shares, real estate property in any place of the world. They can also hold companies. This last option (Private Interest Foundations owning companies), represents a great asset protection since it posses the best of both legal entities.
Main elements
During the creation and administration of a Private Interest Foundation, several parties are involved:
Founder: it’s the person, natural or artificial, who decides to create the foundation and who will transfer goods to its patrimony. It’s important to mention that the Founder is not the owner of the foundation since owners don’t exist in this type of legal entities, contrary to the case of companies. Nevertheless, the Founder, or any third party, can have control of the foundation through a power of attorney, granted through a private document.
Foundation council: it’s composed of three natural persons or one artificial. Its duties are to administrate and supervise the activities of the foundation, making sure that its objectives are accomplished. Other main tasks are the representation towards governmental institutions and other third parties. If the Founder wishes, he can establish in the Foundational Charter the right, for himself or for any other person, to dismiss the Foundation council and name a new one whenever he wants.
Protector: if the Founder wants, he can appoint a Protector for the foundation so that he can supervise the performance of the Foundation council. If established in the Foundation Charter, he can freely remove the members of the Foundation Council and appoint new members. In order to keep confidentiality about the identity of the Protector, his appointment can be done through the Regulations of the Foundation, which is a private document not registered at any public office. The Protector can be someone close to the Founder, the Founder himself or any third party.
Beneficiaries: these are the people beneficiating from the foundation. Usually they are relatives of the Founder, as well as sometimes the Founder himself. This information is included in the Regulations, which, since it is a private document, keeps total confidentiality about their identities.
Advantages
- 1. Private Interest Foundations are completely tax exempted in those revenues coming from outside Panama, with the only exception of an annual franchise tax.
- 2. All of the assets and goods that compose the patrimony of the foundation can not be confiscated by personal liabilities of either the Founder or the Beneficiaries.
- 3. Important aspects of the foundation, such as future objectives or the identity of the beneficiaries, can be established in a private document called Regulations.
- 4. The identity of the beneficiaries doesn’t appear registered at any public office; therefore, guarantying their privacy and confidentiality.
- 5. If the Founder wants more privacy, he can perform through a company.
- 6. A Panamanian Private Interest Foundation can acquire assets, transferred to its patrimony, and administer them for the benefit of the Founder, his relatives or any other third party established as Beneficiary.
- 7. In case of decease of the Founder, foundations offer great succession advantages for the transfer and disposition of assets to the beneficiaries without any need of going through long legal processes.
- 8. Compared to other jurisdictions, Panama offers competitive prices for the creation of Private Interest Foundations.
Uses
- 1. Will substitution: in order to avoid long and complicated legal processes and taxes, the Foundation Council takes care of the distribution of the assets, in a simple and quick process, following the indications previously established.
- 2. Protection of defenceless people: The Private Interest Foundation can give protection to children who still haven’t reach legal age or to legally incapacitated people, who can not manage their patrimony. Those assets would be administered according to the indications previously established.
- 3. Asset Protection: the Private Interest Foundation is an independent legal person, whose assets are completely separated from those of the Founder, Protector or Beneficiaries, therefore, not responding for their obligations, but only for those of the foundation itself.
- 4. Family foundation: it’s created with the objective of administering the distribution of goods to the members of a family, taking care of all needs, such as education, maintenance, feeding, etc.
- 5. Holder of bank accounts, shares or any type of stockholding of private companies.
- 6. Owner of real estate properties, art pieces, etc.
- 7. Replacement of prenuptial agreements.
