The Limited Liability Partnership Under the laws of the Republic of Panama

By : Gabriel Tribaldos

The Panamanian Limited Liability Partnership has been a part of Panama’s trade laws since 1916, when the Panamanian Commercial Code was issued. However, during 2009 it was subject to a profound reform in order to adapt it to an always demanding and changing market.

As its “younger sister”, the worldwide famous “Sociedad Anonima” (1927), the limited liability partnership shall be filed at the Public Registry. It may engage in any kind of licit activity and have a broad or limited object and a definite or indefinite lifespan.

Its name must include the Spanish phrase, “Sociedad de Responsabilidad Limitada” or acronym “S. de R.L.”. The charter must state the domicile, in Panama or elsewhere, although they are required to appoint a lawyer or law firm as resident agent in Panama.

There is no minimum or maximum capital, and the participations or quotas in which it is divided may be in any currency. The capital may be paid in cash, goods or services and members are entitled to a certificate evidencing their participation.

A minimum of two natural or juridical persons, with no restrictions on the nationality, may constitute an LLP and act as administrators, although they are not required to be members. All members are entitled to vote in any partnership discussion, based on their quotas. In case of amendments to the articles of incorporation, any member who does not contribute with his vote may withdraw from the partnership and demand any payments to which he may be entitled, at a fair price. In addition, members may voluntarily withdraw and those remaining have the option to purchase their quotas pro rata, although this is not obligatory.

No member may carry out on their own or on account of others, any business similar or that otherwise hinders the development of operations, or be a member in another partnership under the same circumstances, except by agreement with the other members.

By decision of a members’ majority, members who fail to comply with the above or to pay their quotas, are declared bankrupt, incur in gross misconduct, and fail to have due care towards the partnership may be expelled.

The economic liability of every member for obligations of the partnership is limited to the amount of the participation made or pledged. Members may assign their participation by private document, and the articles of incorporation may or not include a preferential right in favor of members. The assignment must be approved by the members and filed at the Public Registry.

Any income tax caused will borne by the members pro rata to their participation in the capital. Therefore, it is the members not the partnership who is subject to income tax in Panama, if any, making the vehicle fiscally transparent.

Meetings of members shall be deemed duly convened when a majority of the paid-in capital is present or represented, except in the case of special majorities, but agreements may be validly adopted in writing without need of a meeting.

The Administrators appointed in the articles of incorporation or recorded later at the Public Registry shall manage the partnership and be responsible for preparing the annual reports, keep the books or minutes and member registration. They will be liable before the partnership, the members and third parties, for damages caused by fault of their own, fraud, negligence or breach of any legal provision, failure to comply with the articles of incorporation or the partnership agreements and, in general, for any mismanagement. If two or more administrators were liable, they will answer jointly and severally.

The new law contemplates the appointment of officers, a President, Secretary and Treasurer as is common with business companies, and also the granting of general or special powers of attorney.

LLP’s may transform into another kind of partnership and other types of partnership may transform into an LLP. The merger or consolidation with another national or foreign partnership or company of any kind is also allowed. In addition, they may transfer their jurisdiction to Panama to become a Panamanian LLP and vice versa.

The dissolution and liquidation of an LLP is a simple procedure adopted by agreement of its members or expiration of the term in the articles of incorporation.

The updating of this law is yet another evidence of Panama’s commitment in continuing to improve and modernize its juridical vehicles in benefit of all clients in its outstanding service center.

By : Gabriel Tribaldos

The Panamanian Limited Liability Partnership has been a part of Panama’s trade laws since 1916, when the Panamanian Commercial Code was issued. However, during 2009 it was subject to a profound reform in order to adapt it to an always demanding and changing market.

As its “younger sister”, the worldwide famous “Sociedad Anonima” (1927), the limited liability partnership shall be filed at the Public Registry. It may engage in any kind of licit activity and have a broad or limited object and a definite or indefinite lifespan.

Its name must include the Spanish phrase, “Sociedad de Responsabilidad Limitada” or acronym “S. de R.L.”. The charter must state the domicile, in Panama or elsewhere, although they are required to appoint a lawyer or law firm as resident agent in Panama.

There is no minimum or maximum capital, and the participations or quotas in which it is divided may be in any currency. The capital may be paid in cash, goods or services and members are entitled to a certificate evidencing their participation.

A minimum of two natural or juridical persons, with no restrictions on the nationality, may constitute an LLP and act as administrators, although they are not required to be members. All members are entitled to vote in any partnership discussion, based on their quotas. In case of amendments to the articles of incorporation, any member who does not contribute with his vote may withdraw from the partnership and demand any payments to which he may be entitled, at a fair price. In addition, members may voluntarily withdraw and those remaining have the option to purchase their quotas pro rata, although this is not obligatory.

No member may carry out on their own or on account of others, any business similar or that otherwise hinders the development of operations, or be a member in another partnership under the same circumstances, except by agreement with the other members.

By decision of a members’ majority, members who fail to comply with the above or to pay their quotas, are declared bankrupt, incur in gross misconduct, and fail to have due care towards the partnership may be expelled.

The economic liability of every member for obligations of the partnership is limited to the amount of the participation made or pledged. Members may assign their participation by private document, and the articles of incorporation may or not include a preferential right in favor of members. The assignment must be approved by the members and filed at the Public Registry.

Any income tax caused will borne by the members pro rata to their participation in the capital. Therefore, it is the members not the partnership who is subject to income tax in Panama, if any, making the vehicle fiscally transparent.

Meetings of members shall be deemed duly convened when a majority of the paid-in capital is present or represented, except in the case of special majorities, but agreements may be validly adopted in writing without need of a meeting.

The Administrators appointed in the articles of incorporation or recorded later at the Public Registry shall manage the partnership and be responsible for preparing the annual reports, keep the books or minutes and member registration. They will be liable before the partnership, the members and third parties, for damages caused by fault of their own, fraud, negligence or breach of any legal provision, failure to comply with the articles of incorporation or the partnership agreements and, in general, for any mismanagement. If two or more administrators were liable, they will answer jointly and severally.

The new law contemplates the appointment of officers, a President, Secretary and Treasurer as is common with business companies, and also the granting of general or special powers of attorney.

LLP’s may transform into another kind of partnership and other types of partnership may transform into an LLP. The merger or consolidation with another national or foreign partnership or company of any kind is also allowed. In addition, they may transfer their jurisdiction to Panama to become a Panamanian LLP and vice versa.

The dissolution and liquidation of an LLP is a simple procedure adopted by agreement of its members or expiration of the term in the articles of incorporation.

The updating of this law is yet another evidence of Panama’s commitment in continuing to improve and modernize its juridical vehicles in benefit of all clients in its outstanding service center.