Law 47 of August 6, 2013, by which the Republic of Panama adopts a custodial system for shares issued to bearer

The Republic of Panama has recently approved Law 47 of August 6, 2013 (hereinafter “Law 47”), by which it adopts a custodial system for shares issued to bearer.

Said law arises as part of plan to adapt to international standards that have been assessed and implemented by Panama’s government as complement of Law 2 of February 1^st, 2011 regarding due diligence in Panama by lawyers engaged in the incorporation of corporate and trust instruments.

Although it has already been approved, Law 47 will become effective on August 6, 2015. On that date, any certificate of shares issued to the bearer shall have an authorized custodian. To such end, the shareholder shall designate the custodian within twenty (20) calendar days following the issuance date of the relevant share.

The authorized custodian is responsible for keeping a minimum of information as set forth in Law 47 on the owner of the share certificate. Any change of ownership over the share certificate shall be notified to the custodian in order to be effective. This provision also applies to shares under custody given in pledge or guarantee.

For bearer shares certificates issued prior to August 6, 2015, a 3-year transition period is established, namely until August 6, 2018, to appoint an authorized custodian.

Morgan & Morgan Group, through its law firm, is in a position to provide Authorized Custodian services for shares issued to the bearer to all companies for which it acts as resident agent, or through MMG Bank (Panama and Bahamas branches) and MMG Trust (Panama, Zurich, British Virgin Islands offices, among others) for any Panamanian corporation including those for which Morgan & Morgan act as resident agents.

It must be underscored that Law 47 allows for the possibility of establishing inheritance provisions over shares issued to the bearer and placed under custody. These shall have precedence over any other testamentary or probate provisions and may be enforced without need of a court decision, which in our opinion, could be a valuable tool in planning a succession.