According to a recent publication in a newspaper of national circulation in Panama, in the last 11 months (from January to November 2022), 50% of the current corporations have lost their resident agent.
The same article also points out that, according to the statistics of the General Revenue Directorate (DGI), in the last two years 68,456 corporations were disqualified for non-payment of the one-time annual fee of $300.
Why is this happening?
Since the Republic of Panama was included in the FATF "gray" list, a series of regulations, norms and directives have been implemented for corporate service providers in Panama, which have considerably increased the workload on the providers. One of the services affected to comply with these changes has been the Resident Agent service, which is the exclusive responsibility of lawyers or law firms.
Historically, in Panama, the figure of the resident agent is exercised by the lawyer or law firm that manages the incorporation of the company or foundation. In the past, the main function of this person was simply to serve as a liaison between the legal entity and the Government, as well as to remind them of the annual compliance obligations of each entity, but these obligations have been increased or tightened in recent years due to new laws implemented to, among other things, combat money laundering.
For example, for some years now, legal entities (with some exceptions) have been obliged to provide their resident agent with accounting records and proper supporting documentation and information on shareholders and beneficial owners. It is worth noting that this adaptation of the compliance requirements imposed on a legal entity in a "short" period of time has discouraged many providers of such service, who for fear of not being able to comply with the requirements of the law have preferred to give up their role as resident agents.
And, what are the consequences of the resident agent's resignation?
When the resident agent resigns from his position, the status of the legal entity in the public registry will change to "suspended", if this situation is not remedied within a term of up to ninety (90) calendar days from the resignation of such resident agent. If a legal entity is suspended, its corporate rights will also be suspended. The immediate result will be that the corporation and its representatives will not be able to, among other things, enter into contracts, sell or dispose of its assets, or pursue the regular course of its business. Consequently, as long as the suspension persists, no act, document and/or agreement may be registered in the Public Registry of Panama, nor may certifications be issued regarding such legal entity, except those ordered by the competent authority. If the rights of the juridical person are not rehabilitated in the term of up to two (2) years counted from the moment in which the corporate rights were suspended, the Public Registry may, ex officio, dissolve the juridical person with all the legal effects that this entails.
How can I prevent this from happening to me?
Avoiding being affected by the resignation of your registered agent is actually very simple. The main issue is that there must be a fluid communication with your service provider, who must always be aware of the activities carried out by the company or foundation in question, must document the information provided and keep it updated at all times in order to be able to meet any requirement and respond to any request from the competent authority in an expeditious manner.
How can Lex Innova help you?
Solving situations such as those described above is our daily work. At Lex Innova we have extensive experience in matters related to the legal and financial compliance of a Panamanian legal entity and our clients appreciate this experience. However, it is our familiarity with global requirements and trends that sets us apart. Our work is not limited to requiring our clients to help us meet our requirements, but we are interested in and committed to understanding their needs, aspirations and requirements in a comprehensive manner so that we can provide them with the support they need to ensure compliance with local and international standards.
If this topic is of interest to you please use the icon below to arrange a free online consultation with us. We will be happy to clarify your doubts and explain how we can help you resolve your situation.
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