There is a business entity under Panama law which could be referred to in English as a Limited Liability Partnership (“Sociedad de Responsabilidad Limitada”). This entity is governed by Law No. 24 of 1966 (the “Limited Liability Partnership Law”).
Limited liability partnerships are required to have at least 2 partnenrs and can have not more than 20. All the partners or their attorneys-in-fact, as the case may be are required to execute the partnership agreement.
Regarding the manner of execution of the partnership agreement, the law requires that this be done before a Notary Public. In essence, this means either a Notary Public in Panama or a Panama Consul abroad, who has notarial functions. I would assume that it would be preferred that the partners would prefer not to come to Panama for that purpose. Also, given the technicalities, we would not recommend doing this before a Consul. It would therefore seem to us more practical if the partners could grant powers of attorney in favour of persons from this office, whereupon we would proceed with the execution of the partnership agreement and the necessary fillings
Limited liability partnerships are juridical persons different from its partners, which come into existence upon the recordation of their Partnership Agreement in the Panama Public Registryu and a publication of a notice in a local newspaper.
The Limited Liability Partnership Law is rather detailed and somewhat complex, but for purposes of the present discussion, perhaps the most salient characteristics of a Limited Liability Partnership would be as follows:
The Limited Liability Partnership Law provides that the maximum number of partners shall be twenty, and seems to suggest, although this is not altogether clear, that the partners must be natural persons. This requirement was changed by Decree Law No. 5 of 1997 and therefore all or some of the partners may be corporate bodies.
In our opinion, the use of special purpose corporations to act as partners would protect the assets of the parent company from creditors of the partnership.
The names of the partners and their partnership interest (quotas) should be stated in the Partnership Agreement as registered at the Public Registry, and any transfer of interest should also be registered at the Public Registry. The identity of the partners is therefore a matter of public knowledge.
The Limited Liability Partnership Law provides that the capital of the partnership shall be expressed in Balboas, the Panama currency, (its value mirrors that of the US$) and shall not be less than the equivalent of US$2,000 nor greater than the equivalent of US$500,000, represented in a number of quotas of the value of the equivalent of US$100 or multiples thereof. At the time of the constitution of the Limited Liability Partnership, at least 50% should be paid in.
Which may be stated in the Partenrship Agreement, or to the total net assets of the entity. The position which we have taken in the past is the former, that is to say, that this provision refers to the maximum stated capital in the Partenrship Agreement, regardless of whether the net assets are greater, and that therefore there may be a capital surplus in excess of US$500,000.
The law further provides that when it is deemed convenient that the number of partners be greater than twenty (20) or that the capital be greater that US$500,000, the sociedad de responsabilidad limitada should be converted into a corporation.
Where the number of partners is greater than five, the partnership should hold partners meetings at least once a year. Otherwise, partners may be consulted by cable or registered letter or may adopt their decisions in writing in lieu of a meeting.
The powers of the partners are as follows:
(i) To amend the Partenrship Agreement
(ii) To approve the accounts, the report of the administrators and the distribution of profits as proposed by the administrators.
(iii) To resolve on actions against the administrators and other partners for damages caused to the partnership.
(iv) The appointment and removal of administrators.
(v) The appointment of advisors and special attorneys-in-fact.
(vi) To decide on the dissolution, merger and transformation of the partnership.
The partnership shall be managed and represented by one or more administrators, who may but need not be partners, who may be natural or juridical persons.
Where more than one, the administrators have the power to act severally. However, where the Partenrship Agreement requires that they should act jointly, they should so act, except where a delay could prejudice the partnership.
The administrators require special authorization from the partners to carry out acts beyond the normal course of business, to transfer assets, and to encumber assets to secure debts of the partnership.
A Limited Liability Partnership could be registered in about fifteen days from the time that the terms of the Partenrship Agreement are agreed upon and and the appropirate Notarial Instrument has been executed.