Significance of the Minutes Book and Stock Registry of Panama

01 February 2017

Law 22 of April 27, 2015, that modifies article 71 of the Code of Commerce that in its third paragraph states that all legal persons must keep a record of minutes and stocks by using books, electronic records or other mechanisms, as long as they are authorized by Panamanian laws, so that legal persons might openly reflect the operations carried out without being later modified or eliminated.

If there is non-compliance verified, the competent authority must inform the Department of Finance and Economy, who might sanction the corporation with a fine of up to ONE HUNDRED DOLLARS (US$100.00) daily until they clear the situation; if there is an evident unwillingness in complying with this obligation, the Public Registry of Panama will be notified so that they may record a marginal note in the records indicating that there is non-compliance in the dispositions in the Code of Commerce.

It must be noted that this marginal note will not prevent the legal person from filing their corporate documents or from issuing certificates at the Public Registry of Panama; the restriction basically established that the legal person may not be dissolved, also, certificates issued by the Public Registry express that they have pending obligations with the competent authority due to the non-compliance of the provisions of the Code of Commerce.

The annulment of the marginal notation will take place only after the competent authority notifies the Public Registry of Panama that the legal person has rectified the noncompliance.  

Together with the above is Law 18 of April 23, 2015, that modifies articles of Law 47 of august 6, 2013, which adopts an applicable custody of the bearer shares and states that legal persons who holds bearer shares or who pretend to stand by this regime must name an authorized custodian, meaning a custodian duly registered and recognized by the Chamber IV of the Supreme Court of Justice of Panama. 

The law subscribed, in its article 1, states that the appointment of the Custodian and the implementation of this regulation of immobilization of shares must be authorized by the Board of Directors or by the Shareholders Meeting, and that this authorization must be recorded before the Public Registry of Panama with affidavit from the Custodian of Shares.

If the corporation does not wish to adhere to the regulation of bearer shares, it must cancel the bearer shares in their minutes explaining the change to new nominal shares.  

Regarding the noncompliance mentioned above, Law 47 of 2013 in its Article 21, restricts the owner of the bearer shares, from permanently exercising before the corporation, the political and economic rights are acknowledged by Panamanian laws, however they will be subject to the legal action that the interested parties in good faith might execute for the damages incurred.

We recommend our client to review the Minutes book and the stock registry book, to avoid possible infractions or noncompliance with Panamanian laws.