The initiative to create a Private Interest Foundation Law in Panama arises from the popularity acquired in Europe due to the Family or Mixed Foundation (stiftung) of the Principality of Liechtenstein.

Private Interest Foundation is defined as the donation of a patrimony for objective or aims determined in a document entitled Foundation Act. This juridical figure could be regarded as a fusion between a Trust and a joint-stock company. The achievement of the Foundation objectives are trusted upon 3 natural persons which are called the Foundation Council and functions as a Board of Directors and whose names must be established in the Foundation Act.

The patrimony of the Foundation can be increased periodically by the founders, or by any other person. The persons or institutions that receive benefits from the Foundation are named beneficiaries. The donated funds or patrimony will be treated separately from the personal assets of the founder, in this sense, the donated funds or patrimony constitute an autonomous fund and acquire the character of an independent juridical person.

Contrary to a joint-stock company, the Foundation does not have partners or shareholders. After its constitution, the founder, if that's his wish, does not acquire the said privileges in connection with the assets of the autonomous fund. Notwithstanding the above, the law recognizes that beneficiaries, among which the founder may be included, the right and privileges of the Foundation.

It is important to mention that although this type of Foundation may not carry lucrative activities (excluding the administration of properties of the foundation); they hold great real and practical. Being it a permanent institution, it offers the possibility to establish and emulate, even after the death of the founder, the certain ideas and objectives that this person had in mind for his capital or patrimony.

II. Main Attractive Points in the creation of Private Interest Foundation

• Anonymity: The Private Interest Foundation Law establishes that the members of the Foundation Council, the supervisors, as well as any person or institution who, because of their functions, obtains information related to the activities, transactions or operations of the Private Interest Foundation, is complied to complete secrecy. The infringement of this disposition entails severe penal and financial sanctions.
• There is no legal disposition demanding the disclosure of the names of the beneficiaries of the Foundation.
• There is no obligation to register any type of annual income tax return or financial statement.
• No legal restriction on the maximum capital permitted.
• Possibility of realizing any civil or commercial transaction (non-habitual) in any part of the world.
• The client could assign a third person to act as founder, and reserve for his self, if that's what he wishes, the final control of the foundation, designating his self as Protector.
• The Foundation can be relocated at any time.
• The patrimony of the Foundation cannot be seized or injucted.

III. Characteristics

1. Any person (natural or juridical) can constitute it by himself or by empowerment.
2. They do not pursue profitable aims, but can realize non-habitual commercial transactions.
3. They can be constituted in a way that its objectives begin to develop before or after the death of the founder.
4. The Foundation Act and its modifications can be prepared in any language of the Latin alphabet. In the event that the Foundation Act or its modifications are in a language different from Spanish, they will have to be notarized along with its translation by an Authorized Translator of the Republic of Panama .
5. All Foundations and its modifications, pay rights of registry and the annual tax fee, similar to corporation.

In the same manner, they are subject to the limitations regarding money laundry product of drug dealing and similar dispositions established in Decree No. 468 of 1994.

1. For all legal effects, the goods of the Foundation constituted an autonomous fund and the said goods may not be seized, injucted or subjected to any action or preventive measures, with the exception of the obligations incurred. The Foundation does not respond for the personal obligations of the founder, the Foundation Council or the Beneficiaries.
2. The legal binding dispositions in inheritance matter, valid in the domicile of the founder or of the beneficiaries, cannot be conflicting to the foundation.
3. Any type of goods, present or future, whose origins are found in any legal business transaction, can be contributed to the Foundation. In addition, the founder may contribute with the initial patrimony and, consequently, once the Foundation has been constituted, he can transfer other goods so that there is no record of the actual patrimony of the Foundation in the Public Registry of the Republic of Panama .
4. The Foundation Council will be in charge of the administration and observance of the purposes and objectives of the Foundation. In addition, the members of the Foundation Council could be subject to previous countersignature of a Protector, committee or any organ of control designated by the FOUNDER or most of founders.
5. The Foundation Council most render account of its handling to the beneficiaries and the supervising authority of the Foundation, at least once a year.
6. In the Foundation Act, the Founder can reserve himself the right to remove any member of the Foundation Council, as well as the right to designate or add new members.
7. The Foundations constituted overseas, can be registered under Panamanian Law, and vice versa.
8. All controversies which do not indicate a specific resolution proceeding by Law will be resolved through a summary proceeding. Notwithstanding the above, an arbitrary clause can be established in the Foundation Act or in the Foundation Regulations.

IV. Most common use for Private Interest Foundations

• Protection of defenseless people, as minors and persons unable of administrating their own possessions or exposed to the danger of losing their patrimony.
• For the secure continuity and conservation of family businesses.
• To function as a Holding Corporation.
• As a mean for the collection of royalties and other type of credits.
• As the owner of movable and unmovable goods.
• For the managing of bank accounts, due to the fact that they constitute a safe and discrete means for the ownership of numbered accounts.
• For the protection of assets, due to the fact that Private Interest Foundations are not allowed to be inducted or seized.
• To function as a Trust.