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- Panamanian Private Interest Foundations are a hybrid or mix between an International Business Corporation and a trust.
- They may be used for estate planning purposes, when the founder provides the assets to establish the foundation, so they may be distributed among heirs or successors upon the former’s demise.
- They may likewise be used to protect assets, when a natural person or body corporate transfers property to the foundation in order to protect them, whereupon these assets are distributed as per the founder’s or the beneficiaries’ wishes, if so established under the Foundation Charter or Bylaw.
- Foundations may not be used for commercial purposes. Therefore, they are not entitled to acquire any kind of commercial license. However, they may carry out commercial activities eventually. For instance, selling property, purchasing real estate or chattel on behalf of the foundation, the founder or beneficiaries thereof, carry out investments on behalf of the foundation, the founder or beneficiaries thereof, and so forth.
Private Interest Foundation Components:
a. The Founder:
Is the person who establishes the foundations and, eventually, transfers property unto it. Usually, the Founder may reserve certain powers, such as power of appointment of beneficiaries or the power to appoint and remove Foundation Council members, protectors and auditors, unless otherwise specified.
b. The Foundation Council:
Is the governing body of the foundation and may be constituted by 3 natural persons or a body corporate. The Foundation Council is responsible for the administration and management of the foundation’s assets.
c. The Protector:
Is appointed by the Founder or the Foundation Council and is assigned the role of ensuring that the laws and purposes of the foundation are complied. If so specified, the Protector may be convened to participate in all council meetings.
d. The Auditor or Supervising Bodies:
Are appointed to perform audits on the Foundation Council and to ensure it is fulfilling the mandate entrusted upon it, according to the mission set forth in the Foundation Charter and Bylaws.
e. The Beneficiaries:
Are the persons meant to benefit from the foundation, whether it has been established for estate planning purposes or in order to distribute income by means of an asset protection structure. It is worth noting that the Founder may be a beneficiary of the foundation.
Main features of a foundation:
a. It is a body corporate that may own any kind of property, real estate or chattel, monies, financial instruments, whereas it is likewise liable of contracting debts.
b. Once an endowment has been made out to the Private Interest Foundation, such assets no longer belong to the Founder, but rather solely to the foundation.
c. When three years have elapsed after the endowment, such endowment cannot be attached, seized or be subject to any lawsuit or legal actions as a result of obligations or liabilities of the Founder or the Beneficiaries. The only exception to this rule applies whenever assets have been mortgaged or have been put up as collateral.